Rent vs Buy Calculator

A Rent vs Buy Calculator compares the long-term financial costs and net worth impacts of renting a home versus buying one. Rather than just comparing your monthly rent check to a mortgage payment, it factors in hidden costs (like property taxes, homeowners insurance, maintenance, and transaction fees) and opportunity costs (the return you would earn if you invested your down payment and monthly savings in the stock market instead).

Opportunity cost is the financial return you forfeit by choosing one option over another. When you buy a home, you lock up a significant amount of cash in a down payment and closing costs. If you choose to rent, you can invest that upfront cash in the stock market or other investments. The return on those investments is the renter's opportunity cost. If stock returns are high, renting can often be more advantageous than buying.

The break-even year is the year in which the cumulative cost of buying a home becomes lower than the cumulative cost of renting. In the first few years, buying is almost always more expensive due to high upfront closing costs (appraisal, title, transfer taxes) and initial interest payments. Over time, as home equity builds and rent rates inflate, the purchase pays off, shifting the net worth advantage to the buyer.

No, renting is not throwing away money. Renting provides housing shelter in exchange for a fee. While it is true that rent builds no equity, buying also incurs non-recoverable costs—such as mortgage interest, property taxes, home insurance, HOA fees, and maintenance. If these non-recoverable buying costs exceed your rent, and you invest the difference, renting can yield a higher net worth.

Higher home appreciation rates favor buying, as they accelerate home value growth and equity. On the other hand, higher stock market return rates favor renting, because they increase the compounding speed of the renter's stock portfolio, which was funded by the down payment difference.