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Rent vs buy

Which option costs less over your expected time horizon?

Your numbers

$
%
$
%
%
yrs
$

Property tax, insurance, HOA, and maintenance a renter would not pay

yrs
$
%
%

Agent commission plus transfer costs, as a share of the sale price

%

What the down payment and closing costs would earn invested instead

Renting costs less

$619

Net cost of buying$159,276
Net cost of renting$158,657
Monthly mortgage principal and interest$2,578.58
Cash needed to buy$81,250
Sale nets after costs and loan payoff$160,912
Rent paid over the horizon$186,290
Investment gain if you rent$27,633

Tip. Change the years you will stay first. Short stays favour renting almost regardless of the other inputs.

Assumptions

  • Buying: down payment plus closing costs upfront, then mortgage payment and tax/insurance/upkeep every month, minus what the sale nets after selling costs and the remaining loan balance.
  • Renting: rent for the whole horizon, raised once a year, minus the investment gain on the cash a buyer would have locked into the down payment and closing costs.
  • Tax, insurance, and upkeep are held flat in today's dollars, so a long horizon understates the cost of owning.
  • Ignores the mortgage interest deduction, capital gains treatment on a primary residence, and the renter investing any monthly cash-flow difference.
  • Appreciation is a guess, not a forecast. Run a 0% case before treating a buying win as real.

Explore the numbers

Examples and charts

Start with a scenario, then read the response curve to see which input actually moves the answer.

Example 1

Three-year stay

Too short to absorb closing and selling costs, which is why renting usually wins here.

How much buying beats renting

-$26,148

Example 2

Ten-year stay

Long enough for transaction costs to amortize and equity to build.

How much buying beats renting

$56,503

Example 3

Flat market stress test

The same ten years with zero appreciation, which is the case worth checking before you commit.

How much buying beats renting

-$97,056

Sweeps years you will stay from half to one and a half times your value, holding everything else fixed.

Response curve

How years you will stay moves the result

How much buying beats renting

-$619

-$30k-$20k-$10k$0$10k$20k$30k$40k4 yrs6 yrs8 yrs
Chart axis: Years you will stayNow 6 yrs → -$619

What this calculates

Compares renting and buying over the years you expect to stay. Both sides are counted the same way: cash out the door, minus the asset you hold at the end. For buying that is the sale after costs and loan payoff. For renting it is the investment gain on the cash a buyer would have tied up in the down payment.

How to use it

  1. Start with monthly rent and work down the form, or load an example to begin from a realistic case.
  2. Read the headline result alongside the supporting rows, which show the intermediate figures behind it.
  3. Check the assumptions. They decide what the number includes and, more importantly, what it leaves out.
  4. Sweep years you will stay on the response curve to see how much it actually moves the answer.
  5. Run a cautious case as well as an optimistic one before using the estimate in a decision.

Common mistakes

  • Ignoring selling costs, which routinely run 6 to 8% of the sale price.
  • Comparing a mortgage principal and interest payment to rent without adding tax, insurance, and maintenance.
  • Treating an appreciation assumption as a fact because it came out of a calculator.
  • Buying on a three-year horizon because the monthly payment happened to look similar to rent.

Formula

Buy = down + closing + Σ(payment + tax/ins) − [sale price × (1 − selling cost%) − loan balance]. Rent = Σ(rent, grown yearly) − investment gain on the cash a buyer would have tied up.

Inputs

  • Monthly rent
  • Annual rent increase (%)
  • Home price
  • Down payment (%)
  • Mortgage rate (%)
  • Mortgage term (yrs)
  • Monthly tax, insurance, upkeep. Property tax, insurance, HOA, and maintenance a renter would not pay
  • Years you will stay (yrs)
  • Buying closing costs
  • Annual home appreciation (%)
  • Selling costs at exit (%). Agent commission plus transfer costs, as a share of the sale price
  • Return on cash if you rent (%). What the down payment and closing costs would earn invested instead

FAQ

Why does buying lose so often on short horizons?

Closing costs going in and selling costs coming out are both large and are paid once. Spread over three years they are brutal, and over ten they are minor.

Why subtract an investment gain from the rent side?

Because a renter still has the down payment. Ignoring what that cash could earn is the single biggest way rent-versus-buy comparisons flatter buying. Set the return to 0% if you want the simpler comparison.

Why is buying sometimes cheaper on paper but still risky?

The model assumes a smooth appreciation rate and a sale on your schedule. Real housing is illiquid, maintenance arrives unevenly, and a forced sale in a weak year can erase several years of modelled gains.

What is left out?

Mortgage interest deductions, capital gains treatment on a primary residence, mortgage insurance below 20% down, and the renter investing any monthly cash-flow difference. The first three usually favour buying and the last favours renting.

What appreciation rate should I use?

Long-run US home prices have often tracked somewhere near inflation, with long stretches well above and below. Run 0%, 3%, and 5% and see whether your decision changes. If it does, the decision rests on a forecast rather than on arithmetic.

Are these numbers financial advice?

No. They are educational estimates based on the inputs and assumptions on this page. Confirm important decisions with a qualified professional and your own documents.

Read the full guideRent vs buy: which is better?

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