How the comparison works
Most rent-vs-buy comparisons fail because they compare rent with a mortgage payment. That ignores the down payment’s lost investment returns, the costs of owning beyond the mortgage, and the cost of selling. This calculator follows two households with the same money, month by month:
- The buyer pays the down payment and closing costs, then the mortgage (and PMI if under 20% down), property tax, insurance, maintenance and HOA. The home grows in value at the rate you set.
- The renter invests the same down payment and closing costs on day one, then pays rent, which rises each year.
- Each month, whichever household spends less invests the difference at the investment return you set. This keeps the comparison fair: both spend the same total.
Buyer net worth = home value − loan balance − selling costs + buyer's investments
Renter net worth = invested down payment & closing costs + invested monthly differences
The break-even year is the first year in which the buyer’s net worth is higher. If you expect to move before it, renting is likely cheaper.
Worked example
A $400,000 home with 10% down at 6.5% versus $2,200 rent rising 3% a year; 3% home price growth, 5% investment return, 1% maintenance, 3% buying and 6% selling costs, staying 7 years:
| Buyer net worth after 7 years | $136,934 |
|---|---|
| Renter net worth after 7 years | $160,706 |
| Difference | renting ahead by $23,772 |
| Break-even year | not reached in 7 years |
| Year-1 monthly cost of owning | $3,222.75 |
Every one of these assumptions is uncertain. Try a pessimistic case (1% appreciation) and an optimistic one (4%) to see how sensitive the answer is.
What is left out
Income taxes are excluded: the mortgage interest deduction only helps if you itemize (see IRS Publication 936), and investment gains may be taxed differently from home sale gains. Renters insurance, moving costs and the non-financial value of stability or flexibility are also not modelled.
Frequently asked questions
Why does the renter get the down payment?
Because the buyer spends it on the house. Giving the renter the same cash to invest is what makes the comparison fair.
What home appreciation rate should I use?
There is no reliable forecast. Use a range: a low case, your best guess and a high case. The result is only as good as that assumption.
Why is buying worse over short periods?
Buying and selling costs are large one-time expenses. It takes several years of equity growth and appreciation to recover them.
Sources
- Freddie Mac, “Understanding homebuying costs,” My Home by Freddie Mac (accessed September 2026)
- Internal Revenue Service, Publication 936, Home Mortgage Interest Deduction
- U.S. Census Bureau, American Community Survey 2024 1-year estimates, table B25103 (median real estate taxes paid) and table B25077 (median value, owner-occupied units)