Loan Rent vs Buy Calculator
Not "can I afford the payment?" but "which choice costs less over the years I will actually stay?" — with appreciation, rent growth and opportunity cost all in the model.
Year-by-year: cumulative net cost
| End of year | Buying (net cost) | Renting (total rent) | Ahead |
|---|
Buying's net cost credits back your equity (sale price minus remaining mortgage minus selling costs) and charges the opportunity cost of the cash tied up in the home.
How it works
For each year, the model totals what renting costs (rent, rising at your growth rate) against the net cost of buying: down payment + closing costs + mortgage payments + tax, insurance and maintenance + the investment return that cash could have earned (opportunity cost) + selling costs — minus the equity you get back when you sell (appreciated price less the remaining loan balance). The break-even year is the first year buying’s cumulative net cost drops to or below renting’s. It is a simplified model — no tax deductions, no renters’ insurance, no HOA — but it captures the big forces honestly.
Formula & worked example
Formula: For each year, renting's cumulative cost (rent, rising at your growth rate) is compared with buying's net cost: down payment + closing costs + mortgage payments + tax, insurance and maintenance + the investment return that cash could have earned − the equity you get back when you sell.
Worked example: Renting at $1,800/month rising 3% a year costs about $114,677 over 5 years with no equity to show for it — buying only wins if its net cost drops below that line before you move.
When to use this
- You are renewing a lease while wondering if the money should be a down payment instead.
- A relocation has an uncertain length and the stay-duration is the whole question.
- You want buying's costs beyond the mortgage — tax, maintenance, opportunity cost — in the comparison.
- Family advice says 'renting is throwing money away' and you want that claim audited.
How to use it, step by step
- Enter the home price, down payment, rate and term.
- Set how many years you realistically expect to stay.
- Enter the rent of a genuinely comparable home and its yearly increase.
- Set appreciation, tax, insurance and maintenance honestly.
- Read the year-by-year verdict — the crossover year, if any, is the answer.
What the inputs mean
| Input | What it is | Typical values |
|---|---|---|
| Home price / down | The purchase being considered | Down payment also has an opportunity cost |
| Stay duration | Years before you'd sell | Under ~5 years renting usually wins |
| Rent + growth | Comparable rent today and its rise | 3–4%/yr is a common assumption |
| Appreciation | Expected home value growth | Long-run ~3–4%/yr nationally, locally wild |
| Costs | Tax, insurance, maintenance, closing, selling | Maintenance ~1% of price per year |
Another worked example
Renting a comparable home at $2,200 a month, rising 3.5% a year, costs $205,376 over seven years with zero equity at the end. Whether buying beats that depends entirely on the other side of this tool — the equity built, minus buying's considerable friction — which is why the answer flips so often around years 4–6 of staying.
Frequently asked questions
What is the break-even year in rent vs buy?
The point where buying stops being the more expensive choice. Because buying has heavy upfront costs (down payment, closing) and selling costs at the end, renting usually wins for short stays; buying pulls ahead over time as equity builds and rent keeps rising.
Why does the time I plan to stay matter so much?
Round-trip transaction costs on a home are roughly 8–10% of its price. Spread over 3 years that dwarfs any equity you build; spread over 15 years it is minor. The stay length is the single biggest input in this comparison.
What appreciation rate should I use?
US home prices have averaged roughly 4–5% a year over long periods, but local markets vary enormously and past performance is no guarantee. Use 3% as a neutral default and test 0% to see if buying still wins without price growth.
Does this include the mortgage interest deduction?
No. Since the standard deduction rose in 2018, most households do not itemize, so the model leaves tax deductions out for both sides. If you would itemize, buying looks somewhat better than shown.
🏡 Found that buying wins?
Check the most house your income can honestly carry with the Home Affordability Calculator.
What is the 5-year rule about?
Buying's upfront and selling frictions (roughly 8–10% of the price across both ends) need years of equity and appreciation to earn back. Under about five years they usually swamp the benefit — not a law, but this tool will show you your own crossover instead of a rule of thumb.