Rent Or Buy Calculator
Comparing rent with a mortgage payment is the most common way people settle the rent or buy question, and it is the wrong comparison: part of every mortgage payment becomes equity you keep, while the down payment you hand over could otherwise be compounding in the market. This rent or buy calculator simulates both paths year by year, buyer net worth against renter net worth, and reports the break-even year when buying pulls ahead and stays ahead.
Year-by-year net worth
Educational estimate. The model ignores PMI and moving costs; income taxes are included only if you enter a tax bracket, and it assumes the renter invests the down payment and any monthly savings. Assumptions drive the answer: test a range.
Quick Answer
For the pre-filled case, a $400,000 home with $80,000 down at 6.5% against $2,200 rent over 10 years, the verdict is too close to call: the renter finishes ahead by $8,207 (buyer net worth $247,817 vs renter $256,024), under the $10,000 line where this calculator tells you to decide on lifestyle, and there is no sustained break-even within 10 years. Stretch the same case to 20 years and it flips: break-even arrives in year 12 and buying wins by $49,277.
Key takeaways
- The honest comparison is net worth at the end of your stay, not this month’s payment: buyer equity after selling costs against the renter’s invested cash.
- Break-even here means sustained: buying must pull ahead and stay ahead through your final year, or the calculator reports no break-even.
- Time is the dominant variable. The worked example loses narrowly at 10 years and wins clearly at 20 with identical assumptions.
- The price-to-rent ratio (15.2 in the example) is a useful first read, but the simulation, including closing costs, selling costs, and the optional tax bracket, is the real answer.
- Quick Answer
- How to use the rent or buy calculator
- How the simulation works: buyer net worth vs renter net worth
- Worked example: $400,000 home, $2,200 rent, 10-year stay
- Why the monthly payment comparison misleads
- The price-to-rent ratio: a 10-second first read
- The tax bracket field: small input, large swing
- What this model leaves out, stated plainly
- What competing calculators miss
- Frequently asked questions
How to use the rent or buy calculator
Fill in the purchase, your assumptions, and the annual owning costs, then read the break-even year and the verdict. The worked example is pre-filled, and results stay hidden until you click Calculate.
- The purchase: home price, down payment, mortgage rate, loan term (30, 20, or 15 years), your current rent for a comparable home, and how many whole years you expect to stay (1 to 50; anything above 50 is treated as 50).
- Your assumptions: home appreciation, rent growth, and investment return per year, plus buying closing costs and selling costs as percents, and any monthly HOA dues.
- Annual owning costs: property tax and home insurance in dollars per year, maintenance as a percent of home value, and, only if you itemize, your marginal tax bracket for the mortgage-interest deduction.
- Click Calculate: you get the break-even year in large type, the monthly mortgage payment, the true monthly cost of owning, the price-to-rent ratio, both net-worth figures at your horizon, a plain-English verdict, and a year-by-year table.
The six core fields are required and validated with alert messages: a blank or zero home price, a down payment at or above the price, a negative rate or rent, and a stay under 1 year are all rejected. The assumption and cost fields are optional: blank counts as 0, and so does a negative entry, which is why the model cannot simulate falling prices, falling rent, or negative returns. If renting already stretches the budget, check the rent against income first with the 40x rent rule calculator.
How the simulation works: buyer net worth vs renter net worth
Each path is scored the same way: what would you be worth at the end of each year? The buyer’s score is the appreciated home value minus the remaining mortgage balance, minus selling costs, plus any cumulative mortgage-interest tax savings. The renter’s score is an investment account that starts with the down payment plus closing costs and grows monthly.
Monthly P&I = Loan × r(1 + r)n ÷ ((1 + r)n − 1), where r is the monthly rate and n the term in months (at a 0% rate, P&I is simply Loan ÷ n). The same standard annuity formula powers the mortgage payment calculator.
Buyer net worth (year t) = Home valuet − Balancet − Selling costs + Tax saved
Renter net worth = (Down + Closing costs) invested, plus each month’s owning-minus-rent saving when owning costs more, compounded monthly at the investment return
Price-to-rent ratio = Price ÷ (Rent × 12)
Inside each simulated year, the home value and the maintenance dollars grow by the appreciation rate, the loan amortizes month by month, interest paid feeds the tax-savings total when a bracket is entered, and rent steps up once a year by the rent growth rate. Two asymmetries are worth knowing. The renter only invests a monthly saving when owning costs more than rent; if rent is the larger bill, the difference is simply spent, not credited to the buyer. And the monthly owning cost shown in the results is the starting figure, while maintenance inside the simulation quietly grows with appreciation year after year.
Worked example: $400,000 home, $2,200 rent, 10-year stay
The pre-filled case pairs a $400,000 home and $80,000 down payment at 6.5% over 30 years against $2,200 monthly rent, with 3.5% appreciation, 3% rent growth, a 7% investment return, 3% closing costs, 8% selling costs, $4,800 property tax, $1,200 insurance, 1% maintenance, and no HOA or tax bracket.
The monthly owning figure is $2,022.62 of principal and interest plus $400 tax, $100 insurance, and $333.33 maintenance. The price-to-rent ratio is 400,000 ÷ (2,200 × 12) = 15.2. Four more runs of the same tool, changing one thing at a time, show how the verdict moves:
| Run | Break-even | Buyer net worth | Renter net worth | Verdict |
|---|---|---|---|---|
| Worked example, 10-year stay | None within 10 years | $247,817 | $256,024 | Too close to call (renter +$8,207) |
| Same case, 5-year stay | None within 5 years | $137,513 | $169,204 | Renting wins by $31,690 |
| Same case, 20-year stay | Year 12 | $554,113 | $504,836 | Buying wins by $49,277 |
| Worked example + 24% tax bracket | Year 6 | $294,376 | $256,024 | Buying wins by $38,352 |
The year-by-year table inside the results tells the same story in slow motion: at year 1 the buyer is worth $64,457 against the renter’s $106,705, at year 5 it is $137,513 against $169,204, and the gap narrows every year without closing inside the 10-year window. Note the display rounding: net-worth figures print to the nearest dollar, so the $8,207 gap is the difference of the rounded finals.
Why the monthly payment comparison misleads
Owning looks $656 a month more expensive in the worked example, and that headline is doubly wrong. Roughly $289 of the first mortgage payment is principal, which is not spent at all: it moves from your bank account into home equity. At the same time, the renter’s $92,000 of down payment and closing costs is not sitting idle; at a 7% return it does real work, which is exactly why the renter stays ahead for a decade despite the lower monthly bill. Net worth at the horizon is the only scoreboard that counts both effects, and it is the one this calculator uses.
The price-to-rent ratio: a 10-second first read
Price divided by annual rent compresses the whole question into one number. It is a rough market thermometer, not a verdict, and it is a different animal from the investor’s buy-to-rent ratio calculator, which scores a property you would buy to let out rather than live in.
| Ratio | Usual reading |
|---|---|
| Under 15 | Buying usually wins for anyone staying more than a few years; rent is expensive relative to prices. |
| 15 to 20 | The judgment zone. Horizon, rate, and tax bracket decide, which is where the worked example’s 15.2 sits. |
| Above 20 | Renting usually wins unless you stay a long time or appreciation runs hot; prices are rich relative to rents. |
When rent is entered as $0 the ratio prints 0.0, a guard against dividing by zero rather than a real market reading. Treat any $0-rent run with suspicion for a second reason: the renter then invests the entire monthly owning cost, which is how the worked example at $0 rent ends with a $680,395 renter portfolio and a $432,578 renting win.
The tax bracket field: small input, large swing
Entering a marginal bracket credits the buyer with mortgage interest times the bracket, accumulated year after year and added to buyer net worth. It is the single most powerful optional field in the tool: the worked example with a 24% bracket moves from no break-even and an $8,207 renter edge to a year-6 break-even and a $38,352 buying win. That credit only exists in real life if you itemize deductions and your deductible interest actually exceeds the standard deduction, per the rules in IRS Publication 936, so leave the field blank unless you are confident you itemize.
What this model leaves out, stated plainly
Every rent vs buy model simplifies; this one tells you where. PMI is not modeled, so a down payment under 20% looks cheaper here than it will in real life. Moving costs, vacancy gaps between homes, and the cash value of flexibility are absent. Property tax, insurance, and HOA dues are held flat while maintenance grows with appreciation, a reasonable but specific choice. The renter is assumed to be disciplined: the down payment and every monthly saving are invested at your stated return, with no tax on the gains. And the model cannot look down: negative appreciation, rent growth, or investment entries are silently treated as 0, so a falling-market scenario is outside what this tool can express. Run it with whole years only, since a fractional stay such as 10.5 years currently produces $NaN outputs instead of a result.
What competing calculators miss
The field splits between a paywalled gold standard and free tools that stop at a monthly comparison:
- The New York Times calculator: the reference implementation for this comparison, with the same net-worth logic and a tax treatment, but unlimited use sits behind a subscription. This page runs the same style of simulation free, with the year-by-year table on the same screen.
- PrimeCalculator and similar total-cost tools: detailed cost stacks and a break-even year, but the answer is framed as total cost rather than net worth, and the renter’s invested difference is handled less transparently.
- ToolHub-style live-update tools: genuinely good on PMI for under-20% down payments, a real gap here, but thinner on the sustained break-even logic: a lead that later reverses can still read as a win.
- Savvy and other NYT explainer clones: they explain the famous calculator and offer a simpler monthly-cost version; the year-by-year path and the tax-bracket credit are missing.
- The gap this page fills: a free, full simulation whose break-even must be sustained, whose verdict has an explicit too-close-to-call band (within $10,000 either way), and whose own limits, from PMI to the no-negative-growth rule, are printed on the page instead of buried.
Frequently asked questions
It depends on your market, rate, and horizon, not on a universal rule. In the worked example here, buying never sustains a lead within 10 years but breaks even in year 12 of a 20-year stay. Nationally, break-even often lands between 3 and 7 years in mid-priced markets and past 10 years in expensive ones. Your own break-even year is the number this calculator prints.
No. Rent buys housing plus freedom from maintenance, property tax, insurance, and market risk, and the cash a renter does not sink into a down payment can be invested. In the worked example the renter ends 10 years about $8,207 ahead. Renting wastes money only when buying would have built more wealth over the same stay, which is exactly what the simulation tests.
The 5% rule is a shortcut that adds the unrecoverable yearly costs of owning, roughly property tax, maintenance, and the cost of capital, and compares them with 5% of the home’s value. If the unrecoverable costs of owning run higher than the equivalent rent, renting is probably cheaper. It is a useful gut check, but the year-by-year simulation in this calculator is more precise because it uses your actual numbers.
Both matter, but the horizon usually matters most. A low rate helps buying from the first payment, and strong appreciation compounds over time, yet neither rescues a short stay: selling after two years means paying roughly 8 to 10% in round-trip transaction costs. Time in the home is the dominant variable, which is why the same worked example flips between a 5-year and a 20-year stay.
Run the calculator at the shorter horizon before you trust the longer one. Under 3 to 5 years, renting usually wins because closing costs going in and selling costs going out need years of appreciation and principal paydown to overcome. If your plans are uncertain, the renter’s flexibility has real value that no net-worth table captures.
The model assumes a disciplined renter who invests the down payment, the closing costs, and any month where owning costs more than rent, all at your stated return. If you would spend that difference instead, the renting path weakens and buying’s forced savings through principal payments look better. Be honest about which renter you are before trusting the verdict.
Yes, often decisively. Enter your marginal tax bracket and the model credits the buyer with interest paid times the bracket each year. In the worked example, a 24% bracket turns no break-even and an $8,207 renter edge into a year-6 break-even and a $38,352 buying win. The credit only applies if you itemize deductions, so leave the field blank if you take the standard deduction.
Each row is one year of your stay: buyer net worth after selling costs against renter net worth, with the leader marked, and a lead only counts as ahead when it exceeds $100. Look for the first year buying pulls ahead, then check the break-even logic: it is only reported when buying stays ahead through your final year.
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References
- Internal Revenue Service. Publication 936, Home Mortgage Interest Deduction (who can deduct mortgage interest, itemizing requirement, loan limits). Accessed October 24, 2026.
- Internal Revenue Service. Topic No. 701, Sale of Your Home (capital gain exclusion on a main home, relevant to large selling gains the model does not tax). Accessed October 24, 2026.
- Consumer Financial Protection Bureau. Closing and closing costs explained (typical 2 to 5% buying closing costs). Accessed October 24, 2026.
- Consumer Financial Protection Bureau. What is private mortgage insurance? (PMI when the down payment is under 20%, a cost this model omits). Accessed October 24, 2026.
- Federal Housing Finance Agency. FHFA House Price Index (long-run US home price appreciation series for setting the appreciation assumption). Accessed October 24, 2026.
- U.S. Bureau of Labor Statistics. Consumer Price Index (rent of primary residence series for setting the rent growth assumption). Accessed October 24, 2026.
- Board of Governors of the Federal Reserve System. Selected Interest Rates (H.15) (mortgage and Treasury rate series behind market mortgage rates). Accessed October 24, 2026.
- U.S. Department of Housing and Urban Development. Buying a Home (federal homebuying guidance, costs, and assistance programs). Accessed October 24, 2026.
- Freddie Mac. Primary Mortgage Market Survey (weekly national average mortgage rates). Accessed October 24, 2026.
- Joint Center for Housing Studies of Harvard University. Rental Housing research (rent burdens, rent growth, and renter cost research). Accessed October 24, 2026.