Rent vs. Buy Calculator

How this rent vs. buy calculator works

For each year in your comparison period, the calculator simulates the true net cost of each path. The buy path accumulates mortgage payments, property tax, insurance, HOA, and maintenance, then subtracts the home equity you would capture if you sold (home value after appreciation minus remaining loan balance and selling costs) and any mortgage interest tax deductions. The rent path accumulates rent payments (growing at your specified annual rate) and tracks the opportunity cost of the down payment invested at your expected investment return.

What is the crossover year?

The crossover year is the first year in which the net cumulative cost of buying (equity included) drops below the net cumulative cost of renting (opportunity cost included). Before the crossover, renting wins on a net-cost basis. After it, buying wins.

Key assumptions to understand

• Appreciation: The U.S. long-run average is roughly 3–4% per year nominally. Higher appreciation favors buying; lower or negative appreciation favors renting.
• Investment return: This is the return a renter earns by investing the down payment. Historically, a diversified stock portfolio returns ~7–10% annually. A higher return favors renting; a lower return favors buying.
• Maintenance: 1–2% of home value per year is a common rule of thumb. Older homes and higher-cost markets tend to be higher.
• Tax deduction: Under the 2017 TCJA most households take the standard deduction and receive no mortgage interest benefit. Set tax rate to 0 if that applies to you.

Short-horizon vs. long-horizon

Buying involves high upfront transaction costs (closing costs plus down payment opportunity cost) that take years to recover. For horizons under 3–5 years, renting almost always wins. As the horizon extends and home equity accumulates, buying typically becomes the better financial decision, especially in appreciating markets.

Price-to-rent ratio

The price-to-rent ratio (home price ÷ annual rent for a comparable property) is a quick market signal:

• < 15: buying is likely favorable — you build equity faster than you’d pay in rent.
• 15–20: neutral zone; individual circumstances matter more than the ratio.
• > 20: renting may be more cost-effective; the purchase price is high relative to what comparable units rent for.

In mid-2020s San Francisco and New York, price-to-rent ratios exceeded 40—a strong signal to rent unless other factors dominate.

Geographic considerations

Beyond the financial model, the rent-vs-buy decision is heavily influenced by local conditions:

• Property tax rates: Texas and Illinois have property taxes exceeding 2% of home value annually; Wyoming and Hawaii are below 0.4%.
• HOA fees: condos and planned communities often have fees of $200–$800/month that add significantly to ownership cost.
• Home price appreciation history: markets with strong job growth (Austin, Raleigh) have historically seen faster appreciation than rust-belt markets.