How to use the Rent vs Buy Calculator
- Enter the purchase price, down payment and mortgage rate for the home you would buy.
- Set the number of years you realistically expect to stay — this is the single most decisive input.
- Enter today's rent for a comparable place and how fast rents are rising locally.
- Set home appreciation and annual upkeep, tax and insurance as a percentage of the price.
- Read which option wins and by how much, then re-run with a shorter horizon to see how quickly the answer flips.
How the calculation works
Buying is compared on a net-cost basis: every dollar paid out — down payment, mortgage payments, upkeep, property tax, insurance and the costs of buying and selling — minus the equity you walk away with when you sell. Renting is simply the sum of rent paid, escalated each year. That framing avoids the usual mistake of treating the whole mortgage payment as a cost when part of it is forced saving.
Transaction costs are what make short ownership expensive. Buying typically costs 2–5% of the price and selling 5–6% with agent commissions, so a round trip burns roughly 8–9% before anything else happens. At 3% annual appreciation that takes about three years to recover, which is where the common 'stay five years' rule of thumb comes from — it is a break-even calculation, not folklore.
The model deliberately does not credit renters with investing the difference, and it uses a fixed appreciation rate rather than a distribution. Both simplifications favour buying slightly in a rising market and hurt it in a flat one, so treat the output as a comparison of central cases. Run it twice — once at 0% appreciation and once at your local trend — and see whether the conclusion survives both.
Net buy cost = down payment + Σ payments + upkeep + transaction costs − (future value − remaining balance); Rent cost = Σ rent₀ × (1 + g)ʸSource: Case & Shiller, 'Is There a Bubble in the Housing Market?', Brookings Papers on Economic Activity (2003); NAR Profile of Home Buyers and Sellers for typical transaction costs.
Worked example
A $400,000 home at 20% down and 6.5%, held 7 years, against $2,000 rent rising 3% a year.
- Loan of $320,000 amortises to a payment of about $2,023 a month.
- Seven years of payments plus $56,000 of upkeep and tax, plus roughly $12,000 to buy and $29,500 to sell.
- The home grows to about $492,000 and the balance falls to roughly $289,000, leaving about $203,000 of equity.
- Rent over the same seven years totals about $183,500.
Buying comes out ahead over seven years, but the same inputs over three years reverse it — transaction costs dominate short stays.
Frequently asked questions
How long do I need to stay for buying to win?+
Usually three to five years at typical transaction costs and modest appreciation. Below that, the 8–9% round-trip cost rarely gets recovered.
Is renting throwing money away?+
No more than mortgage interest, property tax, insurance and maintenance are. Only the principal portion of a mortgage payment builds wealth.
Should I count investing the down payment instead?+
If you would genuinely invest it, yes — add your expected after-tax return on that sum to the renting side and compare again.
Does this include the mortgage interest deduction?+
No. Since the 2017 standard deduction increase, most households do not itemise, so including it by default would overstate the case for buying.
Last reviewed September 1, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.