Rent vs buy calculator
Enter the home, the rent and your assumptions, see which wins and when.
Every number here is an example, not a forecast — replace it with your own. Tax deductions and taxes on gains are not included.
How does the rent vs buy calculator compare the two?
It follows the method in the Federal Reserve Bank of Cleveland's “Buy a Home or Rent: A Better Way to Choose” (Ergungor and Zaman, 2011): over a holding period the buyer pays the down payment, closing costs, mortgage, property tax, insurance, maintenance and, below 20% down, PMI, and keeps the home's value less selling costs, while the renter invests the down payment, the closing costs and the monthly savings. Here both households spend the same each month on housing — the larger of the two costs — and whoever pays less invests the difference at the return you enter, compounded monthly. The result is each side's net worth after the number of years you choose. All the inputs are yours; the numbers in the form are examples, not forecasts or typical values.
What is the break-even year?
It is the first year from which the buyer's net worth stays at or above the renter's through year 30. In the example — a $400,000 home, 20% down, a 6.5% mortgage (an example rate, not a current one), 3% appreciation and a $2,200 rent rising 3% a year — buying starts $33,393 behind after year 1, because of the closing and selling costs and the returns the down payment could have earned, catches up by the end of year 8, and is $16,104 ahead after 10 years ($234,029 against $217,925). Change a few inputs and the answer changes — try your own rent, your own rate and a longer or shorter stay.
What costs does the calculator include?
For the buyer: the mortgage payment (principal and interest), PMI when the down payment is under 20% (until the scheduled balance reaches 78% of the price, as in the mortgage calculator), property tax and maintenance as a percentage of the home's value each year, insurance and HOA dues that grow at the rate you choose, closing costs at purchase and selling costs at sale. For the renter: the rent, which grows at the rate you choose. The University of Missouri Extension's rent-or-own worksheet lists the same kinds of costs, plus the interest lost on the down payment, which the investment return stands in for here.
What does it leave out?
Income tax effects — the mortgage interest and property tax deductions, the tax on investment returns and on a gain from selling the home — moving costs, renter's insurance and deposits, refinancing, changes in your income, and the fact that real markets do not grow at a steady rate. The home-sale exclusion and the standard deduction vary with your situation; a tax professional can tell you how they apply.
Estimates for planning only — not financial, tax or legal advice. Your own numbers and a tax professional decide. Sources: O. E. Ergungor and S. Zaman, “Buy a Home or Rent: A Better Way to Choose,” Economic Commentary 2011-06, Federal Reserve Bank of Cleveland; S. Leigh and A. Mahmood, “Home Ownership Made Easier,” University of Missouri Extension GH 5002 (Worksheet 1, estimating the annual costs of renting and owning). See also the mortgage calculator, the home affordability calculator and the rent affordability calculator. How we check our calculators.