Rent vs Buy Calculator

The mortgage payment is not the cost of owning. It is the cost of the loan. Property tax, homeowners insurance, and maintenance are charged on the house itself and never appear on the amortization schedule. On a $400,000 home they add roughly $867 a month before a single repair — enough to turn a payment that looked cheaper than rent into one that is not.

Renting is not the absence of an investment. The renter still has the down payment and closing costs. If a buyer hands over $92,000 on day one, the honest comparison gives the renter that same $92,000 invested, plus anything they save each month by paying less for housing. Ignore that and buying wins every comparison automatically, which is why so many rent-versus-buy tools conclude that it does.

You pay to enter and to leave. Closing costs of about 3% and selling costs of about 6% are the reason a short stay rarely works. On a $400,000 purchase that is roughly $36,000 in friction, and it has to be recovered out of appreciation and principal before buying is even level with renting. A five-year stay has to absorb the same friction a twenty-five year stay spreads thin.

A $400,000 home at 6.5% with 20% down, against renting a comparable place for $2,200 a month. Assume 3% annual home appreciation, 3% rent increases, a 6% return on invested money, 1.1% property tax, 1% maintenance, and 3% and 6% transaction costs.

The mortgage payment is $2,023, which looks cheaper than the rent. The actual cost of owning in year one is $2,889 — $674 a month more than renting — and buying requires $92,000 in cash before anyone moves in.

Buying overtakes renting at month 169 — a little over fourteen years. That is far longer than the “five years and you are fine” rule of thumb suggests, and it is entirely a function of today's rate being high relative to the rent. Nothing here says buying is a bad idea; it says this particular house at this particular rent needs a long stay.

Change one input at a time and the breakeven moves sharply. Every row below is the baseline with a single assumption altered:

Buying is a commitment to a place. The largest financial risk in the model above is not the rate — it is having to sell in year three. A job change, a relationship ending, or a city you turn out to dislike all force the 6% selling cost at the worst possible time. Renting prices that flexibility explicitly; owning charges for it only if you use it.

A mortgage is forced saving, and that matters. The comparison assumes the renter reliably invests every dollar they save. Most people do not. If the realistic alternative to a mortgage payment is spending the difference, buying wins in practice even where it loses on the spreadsheet — the principal portion is a savings plan you cannot skip.

Rent control and rate locks cut opposite ways. A fixed-rate mortgage caps your housing cost for thirty years while rents rise; a stabilised lease or a landlord who does not raise the rent undoes much of that advantage. Set the rent growth input to what you actually expect, not the default.

Assumes a 30-year fixed mortgage, no PMI, and no mortgage interest or property tax deduction — most filers take the standard deduction, and including it would flatter buying for households that get no benefit from it. Capital gains treatment on the home sale and the investment account is not modelled. If you itemize, your breakeven is earlier than shown. Once you have decided, size the loan with the mortgage calculator.