Rent vs Buy Calculator
Compare the true cost of renting versus buying a home
How to Use This Calculator
This rent vs buy calculator compares the total financial cost of renting versus purchasing a home over your specified time period. Enter your numbers to get a personalized analysis of which option makes more sense for your situation.
- Home price: Enter the purchase price of the home you are considering. Research comparable sales in your target neighborhood for accuracy.
- Down payment: Input your planned down payment amount. A 20% down payment avoids private mortgage insurance (PMI), though many buyers put down less.
- Mortgage rate: Use current rates from multiple lenders. Your actual rate depends on credit score, loan type, and down payment percentage.
- Monthly rent: Enter what you currently pay or what a comparable rental would cost in your area.
- Rent increase: The average annual rent increase. Historically, rent increases 2-4% per year nationally.
- Years to compare: How long you plan to stay. This single factor often determines which option wins financially.
The calculator assumes property taxes of 1.1%, insurance at 0.5%, maintenance at 1% of home value annually, and 3% annual home appreciation. These represent national averages but vary significantly by location. The opportunity cost of your down payment invested elsewhere is also factored into the comparison.
Understanding Rent vs Buy
The rent versus buy decision involves more complexity than simply comparing monthly payments. A thorough analysis requires understanding the true costs on both sides and how your personal circumstances affect the outcome.
The True Cost of Homeownership
Beyond your mortgage payment, homeownership carries substantial additional expenses that many first-time buyers underestimate. Property taxes typically range from 0.5% to 2.5% of home value annually, depending on your state and locality. Homeowners insurance adds another 0.3% to 1% per year. Maintenance and repairs average 1% to 2% of home value annually, though older homes may require more. HOA fees can add hundreds of dollars monthly in condos and planned communities. These costs combined often add 30-50% on top of your mortgage payment.
Opportunity Cost of Your Down Payment
Money locked in home equity cannot work elsewhere. A $70,000 down payment invested in a diversified stock portfolio historically returns 7-10% annually. Over 10 years, that same money could grow to $140,000 or more if invested instead. This opportunity cost is real and particularly significant in markets where home appreciation is modest. When comparing rent vs buy, consider what your down payment could earn invested in other assets.
The Break-Even Timeline
Most rent vs buy calculations show a break-even point somewhere between 3 and 7 years. Before that point, transaction costs (2-5% to buy, 8-10% to sell) make purchasing unprofitable. The exact timeline depends on your local market conditions, interest rates, and how much home values appreciate. If you might relocate for work or family reasons before the break-even point, renting likely makes more financial sense.
Market Conditions Impact
The price-to-rent ratio in your market significantly affects the calculation. This ratio divides home price by annual rent. Ratios under 15 favor buying, 15-20 are neutral, and over 20 favor renting. Cities like San Francisco and New York often have ratios above 30, making renting mathematically advantageous. Suburban and smaller metro markets typically show ratios of 12-18, where buying often wins over longer time horizons.
Lifestyle Factors Beyond Finances
Financial calculations cannot capture everything. Homeownership provides stability, freedom to renovate, and pride of ownership. Renting offers flexibility, freedom from maintenance responsibilities, and easier relocation. Consider your career trajectory, family plans, and personal preferences alongside the numbers when making your decision.
Frequently Asked Questions
How long should I plan to stay to make buying worth it?
Most financial experts recommend planning to stay at least 5 years to make buying worthwhile, though 7 years provides a more comfortable margin. Transaction costs of 10-15% combined (buying and selling) need time to be offset by appreciation and equity building. In high-cost markets with slow appreciation, the break-even point extends to 7-10 years. Use this calculator with your specific numbers to find your personal break-even timeline.
Is renting really just throwing money away?
No, this is a persistent myth. Renters pay for housing just as homeowners pay mortgage interest, property taxes, insurance, and maintenance. In the early years of a mortgage, most of your payment goes to interest, not equity. A renter who invests the difference between rent and ownership costs can potentially build more wealth than a homeowner, especially in expensive markets with high price-to-rent ratios.
What hidden costs of homeownership should I budget for?
Budget for property taxes (1-2.5% annually), homeowners insurance (0.3-1%), maintenance and repairs (1-2%), potential PMI if under 20% down (0.5-1% of loan), HOA fees if applicable, and higher utility costs for a larger space. Closing costs when buying run 2-5% of purchase price. Selling costs including agent commissions, repairs, and staging typically consume 8-10% of sale price. These hidden costs add 3-5% of home value in annual expenses.
Should I try to time the housing market?
Market timing is notoriously difficult even for professionals. Waiting for a crash that never comes means years of missed equity building and rent increases. However, buying at a peak before a correction can set you back significantly. Focus on your personal readiness: stable income, adequate savings, and a realistic timeline for staying. Buy when the math works for your situation rather than trying to predict market movements.
Should I buy a home if I have student loans?
Having student loans does not automatically disqualify you from homeownership, but it affects the calculation. Lenders consider your debt-to-income ratio, so high student loan payments reduce how much mortgage you qualify for. Pay down high-interest student debt first if rates exceed mortgage rates. Ensure you can comfortably afford housing costs plus loan payments plus an emergency fund before buying.
Does it make sense to buy in expensive cities like San Francisco or NYC?
In high-cost cities with price-to-rent ratios above 25, renting often makes more financial sense, especially for shorter stays. A $1.5 million apartment in San Francisco might rent for $4,000 monthly, a ratio of 31. The same down payment ($300,000) invested elsewhere could generate returns exceeding your rent payments. However, rent control, long-term appreciation expectations, and personal preferences still lead some to buy in these markets.
What home appreciation rate should I assume?
National average home appreciation has historically been 3-4% annually, roughly matching inflation. However, appreciation varies dramatically by location and time period. Some markets have seen 10%+ annual gains, while others have experienced flat or negative growth. Use conservative estimates (2-4%) for planning purposes rather than assuming continued rapid appreciation. This calculator uses 3% as a reasonable baseline.
When is renting clearly the better choice?
Renting typically makes more sense when you plan to move within 3-5 years, when local price-to-rent ratios exceed 20, when your job or income is unstable, when you lack adequate savings for down payment plus emergency fund, when you prefer investing in other assets, or when you value flexibility and freedom from maintenance responsibilities. There is no shame in renting long-term if the numbers and lifestyle fit.
Rent vs Buy Examples
High-Cost City: San Francisco
Emma considers a $1.2 million condo in San Francisco with $240,000 down versus renting a similar unit for $3,800 monthly. The price-to-rent ratio is 26, strongly favoring renting. Over 7 years with 3% appreciation, buying shows a slight advantage, but only if she sells at the right time. If she invested her down payment at 8% returns while renting, she would accumulate approximately $410,000, making renting financially competitive even long-term.
Suburban Market: Austin Suburbs
Marcus looks at a $450,000 home in the Austin suburbs with $90,000 down versus $2,200 monthly rent. The price-to-rent ratio of 17 is neutral to slightly favorable for buying. Planning to stay 10+ years with a growing family, buying makes clear sense. His mortgage payment stays fixed while rent would increase to $2,950 by year 10 at 3% annual increases. He builds $180,000+ in equity over the decade.
Short-Term Scenario: Career Mobility
Priya, an IT consultant who might relocate every 2-3 years, considers buying a $350,000 townhouse versus renting at $1,800 monthly. Even with 4% appreciation, selling after 3 years would net her roughly break-even after transaction costs. She would face the stress of selling quickly if transferred. Renting preserves her flexibility and avoids the risk of selling in a down market. The clear winner: rent until her career stabilizes.
Decision Tips
Follow the 5-Year Rule
If you cannot commit to staying at least 5 years, strongly consider renting. Transaction costs consume too much value for shorter ownership periods. The NYT Rent vs Buy calculator methodology confirms this threshold, showing that most markets require 4-7 years to break even on purchasing.
Factor in All Costs
Never compare mortgage payment to rent alone. Include property taxes, insurance, maintenance, HOA fees, and the opportunity cost of your down payment. According to CFPB guidelines, total housing costs should not exceed 28% of gross income. A realistic budget includes 2-3% of home value annually for taxes, insurance, and maintenance combined.
Do Not Overextend Financially
Buy less house than you qualify for. Lenders approve loans up to 43% debt-to-income ratios, but maxing out leaves no margin for unexpected expenses or income disruptions. Keep your total housing payment including taxes and insurance under 25% of take-home pay. Maintain a 6-month emergency fund beyond your down payment and closing costs.
Consider Your Personal Priorities
Financial optimization is not everything. Some people value the stability and pride of homeownership even when renting might be mathematically superior. Others prioritize flexibility and freedom from maintenance even when buying would build more wealth. Run the numbers, then make the choice that aligns with your lifestyle goals and risk tolerance.
Key assumptions and costs
Property tax rate: 1.1% of home value per year
Home insurance: 0.5% of home value per year
Maintenance costs: 1% of home value per year
Home appreciation: 3% per year
These assumptions reflect typical national averages but can vary significantly by location. Property taxes range from under 0.5% in some states to over 2% in others. Maintenance costs depend on home age and condition. Home appreciation varies dramatically by market and time period. Adjust your expectations based on local conditions.
Did you know?
- The average homeowner has 40 times the net worth of the average renter ($255,000 versus $6,300), though this reflects correlation rather than causation.
- Hidden costs of homeownership add 3% to 4% of home value per year beyond the mortgage payment.
- Historically, home prices appreciate about 3% to 4% annually, roughly matching inflation.
- The average American moves every 7 years, which is approximately the breakeven point for many rent versus buy calculations.
- In 1960, the median home cost 2.5 times the median household income. Today, it costs over 7 times the median income in many markets.