Rent vs. Buy Calculator

The Core Comparison

Renting and buying are fundamentally different financial paths. Renting offers flexibility with generally lower, predictable monthly costs initially, but builds no equity. Buying involves higher upfront costs and ongoing variable expenses (taxes, insurance, maintenance) but allows you to build home equity through principal payments and potential appreciation. Curious how much house you can afford? Check our Home Affordability Calculator.

How the Scenarios Work

1. Buying Scenario:
   • You pay the down payment plus closing costs upfront.
   • Each month, you pay mortgage principal & interest (P&I), property taxes, home insurance, and estimated maintenance.
   • Your home value grows based on the appreciation rate.
   • Net Worth: Calculated as Home Value minus Selling Costs (approx. 6%) minus Remaining Mortgage Balance plus any Investments.
   • Key Assumption: If buying is cheaper than renting in a given month, you invest the difference.
2. Renting Scenario:
   • You invest the equivalent of the buyer's down payment and buying closing costs upfront.
   • Each month, you pay rent (which increases annually).
   • Key Assumption: If renting is cheaper than buying in a given month, you invest the difference.
   • Your investments grow based on the estimated investment return.

Why Renting Often Wins Early On

Real estate has high transaction costs. When you buy, you pay closing costs (2-5%). When you sell, you pay agent commissions and transfer taxes (6-10%). This calculator factors those in. Because of these costs, it typically takes several years for the appreciation and principal paydown of buying to overtake the flexibility and investment growth of renting. This is known as the "Breakeven Horizon."