MORTGAGE
Whether renting or buying costs less depends mostly on how long you stay in the home. This calculator compares the true net cost of both options over your planned stay, including the equity you build and the sale proceeds you get back if you buy.
Enter the home, loan and rent details to compare the net cost of buying with the total cost of renting over the time you plan to stay.
Assumptions: buying closing costs are 3% of the home price, and selling costs are 6% of the home value at sale. Property tax, insurance and maintenance costs are kept flat over the stay, and this comparison does not count the return the down payment could have earned if it had been invested elsewhere. Results are estimates for planning only and are not financial advice.
Say you are looking at a $400,000 home and could put $80,000 down, leaving a $320,000 loan at 6.5% over 30 years. A similar home rents for $2,200 a month. In this example, home prices grow at 3% a year, rent rises at 3% a year, property tax is 1.1% of the price, insurance is $2,400 a year and maintenance is 1% of the price. The calculator also counts buying costs of 3% of the price and selling costs of 6% of the sale value.
If you stay 7 years, buying has a net cost of $164,399, while renting costs $202,289 over the same years. Buying comes out ahead by $37,890, and you would hold $202,618 of equity in the home at the end of the stay.
Now shorten the stay to 3 years and keep everything else the same. Buying has a net cost of $94,884 against $81,600 of rent, so renting wins by $13,284. The buying and selling costs are the same either way, and a short stay gives them no time to be earned back through equity and a fixed payment. That is why the honest answer to renting or buying always starts with how long you will stay. The Consumer Financial Protection Bureau offers free guides for home buyers and borrowers.
Buying a home carries heavy upfront and selling costs. You pay closing costs when you buy and selling costs when you leave, so a short stay gives those costs very little time to be earned back, which is why short stays usually favour renting.
Over a longer stay the picture changes. Your loan balance falls with every payment, your equity builds, and your mortgage payment stays fixed while rent keeps rising, so the fixed payment starts to win against rising rent.
The break-even stay length is often around 5 to 7 years, but it is only a guide. It moves with interest rates, home price appreciation and rent growth, so try a few different stay lengths with your own numbers to see where your own break-even point sits.
Usually around 5 to 7 years. Buying and selling a home costs a lot, and those costs need time to be earned back through the equity you build and a mortgage payment that stays the same while rent keeps rising.
No. Rent buys you a home, flexibility and freedom from repairs, and those are worth real money. This comparison is purely about cost, and the calculator shows both sides so you can see which one comes out cheaper for your stay.
It leaves out a few things on purpose. It does not count the return your down payment could have earned if it had been invested instead, it ignores any tax deductions owners may get, and it cannot put a price on flexibility. Treat it as a cost comparison, not a full financial plan.
It is the home price divided by a full year of rent for a similar home. A low ratio means buying looks cheap compared with renting, and a high ratio means renting looks cheap compared with buying.