Rent vs Buy Calculator: Is Renting or Buying Cheaper?
Is it cheaper to rent or to buy? Enter the home price, loan and running costs, then the rent you would pay instead. The calculator compares the net cost of each over your stay and finds the year buying starts to win.
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Formula
For each year k of your stay:
- Owning, net:
down payment + buying costs + loan payments + (property tax % + maintenance %) x home value at the start of each year + insurance - (sale value x (1 - selling %) - loan balance) - Renting, net:
rent paid (rising each year) - down payment x ((1 + return)^k - 1)
The loan payment comes from the standard fixed-rate formula M = P x r x (1 + r)^n / ((1 + r)^n - 1). The break-even year is the first year where the net cost of owning is no higher than the net cost of renting.
Worked example
A home of 100,000 with 20% down, a 0% loan over 10 years, 1% tax, 1% maintenance, 1,000 insurance, no price growth, 3% buying and 6% selling costs, against 1,000 rent, over 10 years:
- Owning: 20,000 + 3,000 + 80,000 loan payments + 10 x 3,000 running costs = 133,000. Selling returns 100,000 x 94% = 94,000. Net cost 39,000.
- Renting: 10 x 12 x 1,000 = 120,000.
Assumptions: rates are constant, no tax effects, the sale happens at the end of the stay.
When to use it
Use this page when you are deciding between renting and buying for a defined number of years. For the highest price you could afford, use the home affordability calculator. For the monthly payment alone, use the mortgage calculator. The results change a lot with how long you stay, so try several periods.
Second example
With the default 400,000 home, 20% down, 6% over 30 years and 2,000 rent, a 10-year stay costs about 200,591 owning against 224,822 renting, a saving of 24,230 for buying, and buying breaks even in year 8.
Common mistakes
- Comparing the mortgage payment with rent and ignoring tax, upkeep and selling costs.
- Assuming strong price growth every year.
- Forgetting that the down payment could earn a return elsewhere; this page includes it.
- Planning a short stay, when buying and selling costs dominate.
Frequently asked questions
How does this rent vs buy calculator work?
It adds up everything owning costs over your stay (down payment, buying costs, loan payments, property tax, maintenance, insurance) and subtracts what you would get back when you sell, after selling costs and repaying the loan. Renting adds the rent you pay, minus the growth the down payment would earn if invested instead.
What is the break-even year?
It is the first year in which the net cost of owning is equal to or lower than the net cost of renting. With the default inputs on a 400,000 home against 2,000 rent, buying breaks even in year 8. A result of 0 means buying does not catch up within the years you chose.
Why can renting win on a short stay?
Buying and selling carry large one-time costs. On 400,000 at 3% buying and 6% selling costs that is 36,000 before any appreciation, so a 5 year stay with the default inputs costs about 123,221 owning against 105,317 renting.
What does this calculator leave out?
It ignores taxes and tax deductions, which vary by country, and assumes the rates you enter stay constant. It does not invest the monthly difference between owning and renting costs. Treat the result as an estimate and not as advice.
How long do I need to stay in a home for buying to beat renting?
With the default inputs on a 400,000 home against 2,000 rent, buying breaks even in year 8. If rent is 2,500, buying wins by year 4. Over only 3 years, owning costs about 89,372 against 61,572 for renting.
What is the 5% rule for renting vs buying?
It is a rule of thumb: the costs of owning that you never get back are roughly 5% of the home value a year, from property tax, maintenance and the cost of capital. On a 400,000 home that is 20,000 a year, or 1,667 a month; if comparable rent is lower, renting is probably cheaper.
Does buying still win if home prices do not rise?
Not in the default case. With 0% appreciation on the 400,000 home, owning costs 317,022 over 10 years against 224,822 for renting and there is no break-even in that period. Appreciation is the assumption that matters most.