Rent vs Buy Calculator

Frequently Asked Questions

What is the break-even year?

The break-even year is when the buyer's cumulative net wealth — home equity minus total housing costs — permanently overtakes the renter's net wealth from investing the same capital. Before that year, renting builds more; after it, buying builds more. The exact year depends on home appreciation, mortgage rate, and the investment return available by investing instead.

When does renting beat buying?

Renting typically wins when you plan to move within a few years (transaction and closing costs haven't been recovered), when investment returns outpace home appreciation, or when mortgage rates are high. Buying typically wins when home appreciation is strong and you hold for the long term. Adjust the appreciation and investment return inputs to see how sensitive the break-even year is to your assumptions.

What costs does this calculator not include?

The calculator omits property taxes, home insurance, ongoing maintenance (typically 1–2% of home value per year), HOA fees, mortgage origination and closing costs, agent commissions on sale (~5–6% of home value), and capital gains tax on investment growth. Including these typically pushes the break-even year later for buyers — treat the break-even year as an optimistic lower bound.

What investment return should I use for the renting scenario?

Use the real (inflation-adjusted) annual return you expect from investing your down payment and any monthly savings. A globally diversified index fund has returned roughly 5–7% real over long periods. Use 3–4% for a conservative bond-heavy allocation, or 0% if you would hold cash. The calculator applies this return to the down payment from day one and to any monthly surplus when rent is lower than the mortgage payment.

Why can buying win even with a high mortgage rate?

Even with a high mortgage rate, buying can build more wealth if home appreciation is also high — because the appreciating asset is leveraged (you own the full home value while putting down only 10–20%). Conversely, a low investment return in the renting scenario reduces how fast the renter's portfolio grows. Set appreciation to 0% and a high investment return to see renting win instead.

What hidden costs does buying a home in the US typically include?

US buyers often undercount: closing costs (2–5% of purchase price, covering origination fees, title insurance, and escrow), property taxes (0.5–2.5% of assessed value per year depending on state), homeowner's insurance, PMI if your down payment is under 20%, HOA fees in many developments, and ongoing maintenance (budget roughly 1% of home value per year). On sale, expect 5–6% in agent commissions plus potential capital gains tax above the $250,000/$500,000 exclusion. Including all of these typically pushes the break-even year 3–7 years later than the calculator baseline, so treat the calculator output as an optimistic floor.

How do current mortgage rates affect the rent vs buy decision?

At 2021 rates (~3%), buying made financial sense in most US markets within 5–8 years. At current rates (6.5–7.5%), break-even in high-cost metros often stretches to 12–20+ years, making renting and investing the difference more competitive. The break-even year is highly sensitive to your rate — enter your actual quoted rate in the calculator rather than a round-number estimate. Buying still makes sense for long holding periods (15+ years) or when you expect strong local appreciation, but the threshold is meaningfully higher than at low-rate environments.