Buy vs Rent Calculator (2026)
Single source of truth: net cost includes equity, appreciation, opportunity cost, PMI, and tax shield.
The most rigorous Buy-vs-Rent comparison on the web — factors in mortgage amortization, opportunity cost of your down payment, property tax + maintenance + PMI, tax-shield value, selling friction, and rent inflation. Recommendation is mathematically derived, not a heuristic.
Buying scenario
20.0% down
Renting scenario
Your situation
Opportunity cost — what your down payment could earn if invested instead
Drives the mortgage-interest + SALT tax shield
Recommendation
Buying wins
$11,998 cheaper over 7 years (9.2% margin)
Buying — net cost at year 7
$118,423
Total spent $265,581 − equity $147,158
Renting — net cost at year 7
$130,421
Total rent $183,899 − opp. gain $554,628
Break-even year
Year 6
Buying becomes cheaper at year 6
Monthly cost comparison
$2,557 vs $2,000
Buying $557/mo more
Net cost over time — buy vs rent
Net cost = total cash out − equity built (buy) or − investment gains (rent). Lower line wins at each year.
Analysis & insights
Buying wins over your 7-year horizon — net cost of $118,423 vs $130,421. That's a $11,998 (9.2%) advantage. The buy side benefits from $280,000 in forced principal paydown + $80,456 in appreciation — both wealth-building forms renting doesn't deliver. Buying overtook renting at year 6; your planned 7 years extends well past that.
Buying wins
Buying comes out $11,998 ahead over 7 years (9.2% margin). Solid but moderate.
Risk & benchmark gauge
Current band
Solid
9.2% margin of advantage
Industry benchmarks
- Buy — net cost at year 7$118,423
- Rent — net cost at year 7$130,421
- Break-even yearYear 6
- Monthly buy cost (PITI + maint + PMI)$2,557
- Starting monthly rent$2,000
- Equity built at exit$147,158
- Appreciation gain at exit$80,456
- Opportunity gain on down payment$554,628
Key insights
Break-even at year 6
Buying overtakes renting at year 6. You plan to stay 7 years — 1 years past the break-even. That's where the buy advantage builds.
Scenario analysis
At year 3
Renting wins by $19,451
Short-term — selling friction (6-8% in agent + closing) usually still hurts buyers here.
At year 5
Renting wins by $4,858
Typical "stay" threshold the industry quotes — but verify it for YOUR scenario.
Your stay (year 7)
Buying wins by $11,998
Based on your planned 7-year tenure — this is the headline recommendation above.
At year 10
Buying wins by $41,211
Long-tenure homeowner — compounding equity + appreciation typically dominates.
At year 30 (mortgage paid)
Buying wins by $439,902
Mortgage fully amortized; renter has paid 30 years of inflating rent.
Recommended actions(2)
Proceed with the home purchase
High priorityNet savings of $11,998 over 7 years. Confirm your geographic + career stability for that period before signing.
Impact: Skip the purchase and you forfeit $11,998 of the buy advantage.
Stress-test the assumptions
Medium priorityChange appreciation ±2 points, investment return ±2 points, and stay duration ±3 years. If the recommendation flips on small changes, treat it as marginal regardless of the headline label.
Impact: Reveals how sensitive your answer is to assumptions you can't fully control.
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This tool is for educational purposes only and does not constitute financial, tax, or investment advice. Consult a qualified financial professional for advice specific to your situation.
What is Buying vs Renting?
The claim that renting is throwing money away is the most persistent myth in personal finance, and it survives because it contains a fragment of truth wrapped in a large error. Rent buys shelter and produces no equity. But a substantial share of a mortgage payment also produces no equity — interest, property tax, insurance, maintenance and transaction costs are all money spent, not money stored.
In the early years of a mortgage those unrecoverable costs are large. On a typical 30-year loan, the first year's payments are roughly 85% interest. Add taxes, insurance and maintenance, and it is common for owning to consume more non-equity money per month than renting the equivalent property.
What makes buying win over time is not the payment but the transaction: rent tends to rise with inflation while a fixed mortgage payment does not, the loan amortises, and any price appreciation applies to the whole asset rather than to your deposit. The honest question is therefore not which is better, but how long you must stay for the arithmetic to turn.
The formula — how to calculate Buying vs Renting
- Transaction costs
- = roughly 2–5% to buy and 6–10% to sell, the largest single factor in short-horizon comparisons
- Opportunity cost
- = the return the down payment and closing costs would have earned if invested instead
- Appreciation
- = change in property value — the most uncertain input and the one most often assumed too optimistically
- Excluded
- = principal repayment is not a cost; it converts cash into equity and is recovered at sale
A comparison that ignores the opportunity cost of the down payment, or the cost of selling, will almost always favour buying incorrectly.
Step-by-step example
- 01Compare buying a $400,000 home with 20% down at 6.5% against renting the equivalent property for $2,200 per month.
- 02Buying, year one: interest ≈ $20,600; property tax at 1.1% = $4,400; insurance = $1,800; maintenance at 1% = $4,000. Unrecoverable total ≈ $30,800, or about $2,567 per month.
- 03Renting, year one: $2,200 × 12 = $26,400, plus renter's insurance of about $200 = $26,600.
- 04On cash cost alone, renting is roughly $4,200 cheaper in year one — before counting the $80,000 down payment.
- 05That $80,000 invested at 7% would earn about $5,600 in year one, widening the renting advantage to roughly $9,800.
- 06Buying must overcome that gap plus about $12,000 in purchase costs and roughly $28,000 in eventual selling costs at 7%.
- 07At 3% annual appreciation the home gains about $12,000 in year one, and the mortgage amortises roughly $3,700 of principal.
- 08Netting these, the break-even typically lands between years 5 and 7 — after which the fixed payment against rising rents compounds steadily in the owner's favour.
The costs each side of the comparison forgets
Most buy-versus-rent comparisons fail not because the arithmetic is hard but because entire categories of cost are omitted from one side.
Full cost comparison
| Cost | Owner pays | Renter pays |
|---|---|---|
| Mortgage interest | Yes — largest early cost | No |
| Principal | Yes, but recovered as equity | No |
| Property tax | Yes, and it reassesses upward | Indirectly, via rent |
| Building insurance | Yes | No — only contents insurance |
| Maintenance and repairs | Yes, 1–2% of value annually | No |
| HOA dues | Yes, where applicable | Usually included in rent |
| Purchase costs | 2–5% of price | None |
| Selling costs | 6–10% of price | None |
| Opportunity cost of down payment | Yes | No — capital stays invested |
| Exposure to rent increases | No, if fixed-rate | Yes |
Why transaction costs dominate short stays
Buying and selling a home is expensive in a way that few other transactions are. Purchase costs run 2–5%, and selling costs — agent commissions, transfer taxes, title fees and typical concessions — have historically run 6–10%.
Combined, a round trip can consume 8–15% of the property value. On a $400,000 home that is $32,000–$60,000 that must be recovered from appreciation and amortisation before ownership breaks even against renting.
This is why the standard guidance is to buy only if you expect to stay at least five years. Below that horizon, appreciation rarely covers the round-trip cost, and a forced move in year two or three is one of the more reliable ways to lose money in housing.
Note that commission structures have been changing following litigation and settlements affecting how buyer-agent compensation is negotiated. Treat commission as a negotiable line item and confirm the actual figure rather than assuming a historical norm.
Appreciation is an assumption, not an input
Long-run US home prices have roughly tracked inflation with substantial regional variation, and individual markets have gone a decade without real gains. A model showing buying ahead only at 5%+ annual appreciation is not showing that buying wins — it is showing that the conclusion depends entirely on an optimistic guess.
The tax question has changed
Mortgage interest and property tax deductions were historically a significant argument for buying, but they now benefit far fewer households than most people assume. The deduction only produces value to the extent that itemised deductions exceed the standard deduction, which for 2026 is $16,100 for single filers and $32,200 for married couples filing jointly.
A household with $20,600 of mortgage interest and $4,400 of property tax has $25,000 in itemised deductions — well short of the $32,200 joint standard deduction, producing no benefit at all. The state and local tax deduction cap further limits this in high-tax states.
The genuinely valuable tax provision for most owners is the capital gains exclusion on a primary residence: up to $250,000 of gain for single filers and $500,000 for married couples filing jointly, subject to ownership and use tests. That is a substantially larger benefit than the interest deduction for the typical household, and it rewards staying put.
What the arithmetic does not capture
Owning transfers risk onto you. Repairs, special assessments and insurance repricing become your problem rather than a landlord's, and a job change becomes materially more expensive when exiting costs 6–10% of the asset value.
Renting buys optionality. The ability to move for a better job, leave a declining area or resize quickly has genuine financial value that a spreadsheet does not show — particularly early in a career when income growth depends on mobility.
Owning provides payment stability and forced saving. A fixed mortgage payment is insulated from rent increases, and amortisation converts income into equity automatically, which for many households is the only saving that reliably happens.
These non-financial factors legitimately override the numbers in both directions. The purpose of running the calculation is not to be told what to do, but to know what the choice costs.
The price-to-rent ratio is a fast sanity check
Divide the purchase price by annual rent for a comparable property. Below about 15 typically favours buying; above about 20 typically favours renting; between the two, the decision hinges on how long you will stay. A $400,000 home against $2,200 monthly rent gives a ratio near 15.2 — genuinely borderline.
Key considerations
- Set your expected time horizon first. Under five years, renting usually wins on cost alone.
- Compare like with like — the rent for a property equivalent to the one you would buy, not your current smaller apartment.
- Include the opportunity cost of the down payment. Omitting it is the most common error in these comparisons.
- Model appreciation conservatively, and test the conclusion at 0% to see how dependent it is on price growth.
- Confirm whether itemising actually beats the standard deduction before counting any tax benefit.
- Budget maintenance at 1–2% of value annually — it is the cost renters never see and owners consistently underestimate.
- Consider job stability and mobility. A likely relocation within three years usually settles the question by itself.
Common mistakes to avoid
- Comparing rent against principal and interest only, omitting tax, insurance and maintenance.
- Ignoring the 6–10% cost of selling, which is the largest single item in short-horizon comparisons.
- Forgetting that the down payment would otherwise be invested and earning a return.
- Assuming aggressive appreciation and treating the resulting conclusion as robust.
- Counting mortgage interest deductions without checking whether itemising beats the standard deduction.
- Treating the entire mortgage payment as building equity when early payments are roughly 85% interest.
- Buying primarily to avoid "wasting money on rent" while ignoring that interest, tax, insurance and maintenance are equally unrecoverable.
Frequently asked questions
Sources & references
Written and fact-checked by the CalcProLabs Editorial Team against CFPB guidance and IRS Publication 936. Read our calculation methodology and editorial policy.
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