Rent vs. Buy Calculator
Whether renting or buying is cheaper depends on your price-to-rent ratio, how long you plan to stay, and what your down payment could earn if invested instead. This calculator uses an outflow-parity wealth comparison — both paths commit the same cash each month, and whichever costs less invests the difference. With the default inputs ($400,000 home, 20% down, 6.5% rate, $2,000/month rent), renting comes out ahead by about $26,500 over 10 years.
Buying
Renting
Investing & Taxes
Renting saves you
Cumulative Net Cost
Home Equity vs. Renter Portfolio
Year-by-Year Comparison
| Year | Annual Cost: Buy | Annual Cost: Rent | Home Equity (net) | Renter Portfolio | Net Cost: Buy | Net Cost: Rent | Cheaper |
|---|---|---|---|---|---|---|---|
| Year 1 | $32,677 | $24,180 | $72,784 | $107,426 | $51,893 | $17,251 | Rent +$34,642 |
| Year 2 | $33,001 | $24,900 | $90,270 | $123,558 | $67,409 | $34,120 | Rent +$33,289 |
| Year 3 | $33,338 | $25,642 | $108,487 | $140,439 | $82,529 | $50,578 | Rent +$31,951 |
| Year 4 | $33,689 | $26,405 | $127,472 | $158,112 | $97,234 | $66,593 | Rent +$30,641 |
| Year 5 | $34,053 | $27,192 | $147,257 | $176,627 | $111,501 | $82,131 | Rent +$29,370 |
| Year 6 | $34,432 | $28,003 | $167,882 | $196,036 | $125,309 | $97,155 | Rent +$28,154 |
| Year 7 | $34,827 | $28,837 | $189,384 | $216,393 | $138,633 | $111,625 | Rent +$27,009 |
| Year 8 | $35,238 | $29,697 | $211,806 | $237,758 | $151,450 | $125,497 | Rent +$25,953 |
| Year 9 | $35,665 | $30,582 | $235,189 | $260,195 | $163,732 | $138,726 | Rent +$25,006 |
| Year 10 | $36,110 | $31,495 | $259,580 | $283,771 | $175,451 | $151,260 | Rent +$24,192 |
What is the price-to-rent ratio?
Annual rent divided by home price. Ratios below 5% historically favor buying; above 5% favor renting. This calculator goes deeper by modeling actual cash flows, tax savings, and investment returns rather than relying on a single ratio.
What is the 5% rule of renting vs. buying?
A rule of thumb that says annual ownership costs (property tax, maintenance, and the cost of capital on the down payment) run about 5% of a home's value. If rent is less than 5% ÷ 12 of the home price, renting may be cheaper. This calculator replaces that estimate with a precise month-by-month simulation.
What hidden costs do first-time buyers miss?
PMI on sub-20% down payments, closing costs (typically 2–5% of the home price), annual maintenance (budgeted at 1% of home value), selling costs (around 6% in agent commissions and fees), and the opportunity cost of the down payment not being invested.
Methodology
This calculator uses an outflow-parity wealth comparison: both the buyer and a hypothetical renter start with the same cash (the down payment plus closing costs — the buyer spends it, the renter invests it). Each month, whoever has the lower housing cost invests the difference in a portfolio growing at your chosen investment return. At the end of the horizon, the buyer is assumed to sell the home, paying agent commissions and fees, and settle the remaining mortgage. Wealth is then compared: home equity plus the buyer's investment portfolio versus the renter's portfolio.
Mortgage interest and property taxes are deductible when itemizing exceeds the $16,100 standard deduction (2026, single filer). Interest on balances above $750,000 is prorated. State and local taxes are capped at $40,400.
This model assumes a single fixed-rate mortgage, annual rent increases, and monthly portfolio compounding. It does not model capital gains taxes on the home sale, rental income from the purchased property, or adjustable-rate mortgages.
Disclaimer: This calculator models 2026 federal tax rules for single filers. It does not account for state-level deductions, AMT, charitable contributions, or other itemized deductions. Consult a tax professional for advice specific to your situation.
Frequently Asked Questions
Is it cheaper to rent or buy a home?
It depends on your breakeven year — the first year at which selling the home would leave you wealthier than if you had rented and invested the difference. If you plan to stay longer than the breakeven year, buying wins. Key drivers include the home price relative to rent, mortgage rate, down payment size, home appreciation, investment returns, and tax savings.
What is the breakeven year in a rent vs. buy comparison?
The breakeven year is the first year where the buyer's total wealth (home equity net of selling costs plus any investment gains) exceeds the renter's investment portfolio. Before that year, the upfront costs of buying (down payment, closing costs, and higher monthly expenses early on) mean the renter's invested savings are ahead.
How does opportunity cost change the rent vs. buy math?
The renter's hidden asset is the down payment and closing costs invested at market returns instead of locked into home equity. A $80,000 down payment growing at 7% annually adds significant wealth on the renting side. Many simple rent-vs-buy comparisons ignore this, biasing the result toward buying.
Does this calculator include PMI, taxes, and selling costs?
Yes. PMI is charged on loans exceeding 80% of the home's value and drops automatically when the balance falls below that threshold. Mortgage interest and SALT deductions are compared against the standard deduction to compute actual tax savings. Maintenance is budgeted at 1% of home value annually, and selling costs (typically 6% for agent commissions and fees) are deducted at the end of the horizon.
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Bret Mishler
Bret Mishler is the founder and lead developer of MoneyMage. As a Senior Software Engineer and Tech Lead specializing in enterprise-scale cloud billing systems, Bret brings production-grade financial engineering rigor to personal finance. He built MoneyMage to deliver mathematically transparent, lightning-fast financial tools — applying the same strict precision required to process billions of dollars in cloud infrastructure to your personal wealth.
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