Rent vs. Buy Calculator
Compare the true total cost of renting versus buying — including equity built, appreciation, maintenance, and closing costs — to find your break-even point.
Is It Cheaper to Rent or Buy?
Fill in your details on the left to see a complete cost comparison, including equity built and your break-even timeline.
Renting vs. Buying: What the Math Doesn’t Tell You
Why Equity Is Forced Savings
Every mortgage payment builds equity in two ways: principal paydown (the portion that reduces your loan balance) and appreciation (the home’s increase in market value). Renters pay money that leaves their hands permanently. Homeowners are effectively paying themselves — at the end of 30 years, the mortgage is gone and they own an asset worth multiples of what they paid. This is why homeowners have a median net worth roughly 40x that of renters according to Federal Reserve data.
The 5% Rule: Unrecoverable Costs of Ownership
Financial planner Ben Felix popularized the “5% rule” as a quick mental test: the annual unrecoverable cost of owning a home (property taxes ~1%, maintenance ~1%, cost of capital tied up in down payment ~3%) equals roughly 5% of the home’s value per year. If you can rent a comparable property for less than 5% of its purchase price per year (i.e., a monthly rent below the home price divided by 240), renting may be financially superior — especially in the short term.
When Renting Makes More Sense
- You plan to move within 3–5 years — closing costs alone take years to recoup
- Your local price-to-rent ratio is very high (home price > 25x annual rent)
- You need financial flexibility to invest the down payment in higher-yield assets
- The local market is overheated and appreciation may be negative near-term
When Buying Makes More Sense
- You plan to stay 7+ years — enough time to surpass the break-even point
- You want stability, predictable payments, and freedom to customize
- Local appreciation is strong and inventory is constrained
- You can put 20% down, avoiding PMI and securing a better rate
- Rents in your area are rising rapidly, making buying look better each year
What the Break-Even Point Really Means
The break-even point is the year at which the net cost of buying (all payments minus equity built) equals the cumulative cost of renting. Before that point, renting is mathematically cheaper. After it, buying produces a better financial outcome. Break-even under 3 years is exceptional; 5–7 years is typical in most U.S. markets; over 10 years suggests high purchase prices relative to rents.
Note on This Calculator
Closing costs are estimated at 3% of the purchase price as an upfront sunk cost. Tax deductions (mortgage interest deduction) are excluded for simplicity — they can meaningfully improve the buying case for higher earners. The investment opportunity cost of the down payment is also excluded. For a comprehensive analysis, speak with a financial advisor.