Rent vs Buy Calculator

The rent vs. buy decision is not a simple comparison of monthly rent to monthly mortgage payment. A mortgage payment covers only principal and interest — when you add property taxes, homeowners insurance, maintenance, HOA fees, and the opportunity cost of the down payment, the true monthly cost of owning a home is typically 40–60% higher than the mortgage payment alone. A family with a $2,400/month mortgage on a $400,000 home at 6.5% may have a true monthly ownership cost of $3,500–$3,800/month once all carrying costs are included.

The correct comparison is net cost, not gross cost. When you buy, you accumulate equity through principal paydown and appreciation — so your total outflow minus what you recover when you sell is your true cost. When you rent, the opportunity cost of not investing the down payment and monthly savings is real wealth that partially offsets what looks like "throwing money away on rent." The calculator above models this correctly by tracking both home equity and renter investment portfolio growth over your time horizon.

The single most important variable in the rent vs. buy calculation is how long you stay. Buying is expensive to initiate (3–6% closing costs, prepaid expenses, moving costs) and expensive to exit (5–6% real estate agent commissions, transfer taxes). These transaction costs, spread over a short ownership period, dramatically increase the effective annual cost of owning. The general rule in most U.S. markets is that buying begins to outperform renting financially somewhere between years 4 and 7, assuming moderate appreciation. Buyers who sell in under 3 years almost always would have been better off renting.

First-time buyers frequently underestimate total ownership costs because they focus on the mortgage payment and overlook the four other major carrying cost categories. The following breakdown uses a $400,000 home with a 20% down payment and 6.5% mortgage rate as a baseline example.

The breakeven point is the number of years you must stay in a home for buying to produce a better financial outcome than renting. It varies widely by market, price-to-rent ratio, mortgage rate, and appreciation rate. The following illustrates typical breakeven timelines across market conditions.

The most reliable indicator of whether a local market favors buying or renting is the price-to-rent ratio — the median home price divided by the annual cost of renting a comparable home. A ratio below 15 generally favors buying; 15–20 is neutral; above 20 generally favors renting unless you plan to stay 10+ years and expect strong appreciation. In San Francisco (ratio ~40) and Manhattan (ratio ~35+), the financial case for renting is unusually strong compared to the national average.

The down payment is the most visible upfront cost of buying a home, but it is typically only 70–80% of the total cash required at closing. Buyers who budget only the down payment frequently arrive at closing short of funds. The following table covers the full range of upfront and first-year costs on a $400,000 home purchase.

The mortgage market offers a range of loan types with different down payment requirements, rate structures, and eligibility criteria. Understanding these options helps first-time buyers identify the lowest-cost path to homeownership for their specific financial situation.

The price-to-rent ratio divides the median home price by the median annual rent for a comparable home. A ratio below 15 historically favors buying; 15–20 is a neutral zone; above 20 generally favors renting unless you expect above-average appreciation or plan to stay very long-term. The following data reflects 2024 estimates across major U.S. markets.

Estimates based on 2024 median sale and rental data. Price-to-rent ratios above assume a 3-bedroom single-family equivalent. Individual properties vary significantly — use the calculator above with actual local prices and rents for a personalized comparison.