Rent vs Buy Calculator
Compare what you would be worth after renting or buying the same home: a 30-year fixed mortgage with property tax, insurance, maintenance and PMI on one side, the invested down payment plus every dollar of difference on the other.
New to US mortgages? Start with the lesson on how they workYour numbers
The purchase price of the home you would buy.
Under 20% the model adds PMI until your equity reaches 22% of the original value, the Homeowners Protection Act cutoff.
The annual rate on a 30-year fixed loan, the standard US mortgage.
What renting the equivalent home costs today. Rent grows each year at the rate in the advanced settings.
The horizon matters more than almost anything else: buying front-loads its costs and needs time to claw them back.
Advanced assumptions
Nominal. US homes have averaged roughly 3-4% a year over the long run, with huge swings around that.
Nominal return on the renter's invested cash: the down payment, closing costs and any yearly savings from renting.
Varies enormously by state, from around 0.3% in Hawaii to over 2% in New Jersey. 1.1% is near the national average.
The 1% rule of thumb. Insurance is charged separately at a fixed 0.5% of value.
Agent commissions plus transfer taxes and fees. Deducted from the home's value in every year's net worth figure.
What happens to my data?
Renting comes out ahead after 10 years by
$46,603
Buy net worth
$253,459
Rent net worth
$300,062
Monthly principal and interest on the $80,000 down scenario is $2,023. Over 10 years the owner pays $193,998 of mortgage interest while the renter pays $281,553 of rent. On these settings buying never catches the renter's portfolio within the horizon. Figures are illustrative, not financial advice.
Net worth, year by year
Buyer: home value minus the remaining loan and selling costs. Renter: the invested down payment, closing costs and yearly differences.
The 5% rule of thumb, and what this tool does instead
A popular heuristic says the true annual cost of owning is about 5% of the home's value: roughly 1% property tax, 1% maintenance and 3% cost of capital, meaning the return your down payment and mortgage-serviced equity give up by not being invested elsewhere. Divide 5% of the price by 12 and if the equivalent rent is cheaper than that figure, renting is the better financial deal; dearer, and buying is. On a $400,000 home that yardstick is $1,667 a month against your $2,000 rent.
It is a heuristic, not a law. It bakes in one set of assumptions about opportunity cost and ignores your down payment size, PMI, appreciation and how long you stay. This calculator runs the full year-by-year arithmetic instead, with the opportunity cost made explicit: every dollar the renter does not spend on ownership is invested at your chosen return, the same logic that powers our compound interest calculator.
What this calculator assumes and leaves out
Defaults: a 30-year fixed mortgage, 3.5% a year home appreciation, 3.5% rent growth, a 7% nominal investment return, 1.1% property tax, 0.5% insurance and 1% maintenance (each on the home's current value), PMI at 0.75% of the original loan a year when the down payment is under 20% (ending automatically at 22% equity of the original value, per the Homeowners Protection Act), 3% closing costs at purchase and 7% selling costs at the end. Every one of them is adjustable above, and every one of them is a guess about the future.
Deliberately excluded: the mortgage-interest tax deduction. Since the 2017 tax law roughly doubled the standard deduction, most households no longer itemise, so the deduction is worth precisely nothing to them; including it would flatter buying for the majority. Also excluded: all other tax effects (capital gains on the sale and its exclusion, tax on the renter's investment gains, SALT), housing crashes and negative-equity spells (appreciation is a smooth line here; real markets are not), and one-off frictions such as moving costs and refinancing. General information, not financial advice.
Frequently asked questions
Is it better to rent or buy a home right now?
Does this calculator include the mortgage interest tax deduction?
What is the 5% rule for renting versus buying?
What does the break-even year mean?
When does PMI stop in this calculator?
Does the calculator account for house price crashes?
Related reading
How a US mortgage works
The 30-year fixed, PMI and the Homeowners Protection Act rules this model follows.
The 4% rule
What an invested portfolio is actually for: the opportunity-cost side of this comparison, taken to retirement.
Compound Interest Calculator
See what the renter's invested down payment does on its own over the same horizon.
US Net Worth Percentile
Where either outcome would place you against other American households.