How this calculator works
The calculator runs both paths month by month. The buyer pays the down payment and closing costs, then the mortgage, property tax, maintenance and insurance. The renter pays rent, but invests the same up-front cash — and, in any month when owning costs more than renting, invests the difference. When renting costs more, the buyer invests the difference instead, so both paths spend the same money.
At the end of your stay the home is sold (minus selling costs) and the loan repaid. Whichever path leaves more money is the better choice. The break-even year is the first year the buyer comes out ahead.
Assumptions and tips
- Rent rises once a year; home value grows smoothly.
- No PMI is added for down payments under 20% — add it to maintenance if it applies.
- Investment returns are not guaranteed; try a lower return to stress-test the answer.
Worked example
Using the default values in the calculator above:
| Input | Value |
|---|---|
| Years you plan to stay | 7 |
| Monthly rent | $2,200 |
| Rent increase per year | 3 % |
| Home price | $400,000 |
| Down payment | 20 % |
| Mortgage rate | 6.5 % |
| Loan term | 30 years |
| Buying closing costs | 3 % of price |
| Selling costs | 6 % of sale |
| Home value growth | 3 %/yr |
| Property tax | 1.1 %/yr |
| Maintenance | 1 % of value/yr |
| Homeowners insurance | 1,800 $/yr |
| Investment return (if renting) | 6 %/yr |
| Result | Value |
|---|---|
| Better choice over 7 years | Renting |
| Ahead by | $22,370 |
| Net worth if you buy | $173,101 |
| Net worth if you rent and invest | $195,470 |
| Buying breaks even after | 12 years |
| Home value at the end | $491,950 |
| Loan balance at the end | $289,332 |
| Total rent paid | $202,289 |
| Total owner costs (incl. down payment & closing) | $339,745 |
| Monthly principal & interest | $2,022.62 |
Step by step:
- Up-front cash to buy = $400,000 × (20% down + 3% closing) = $92,000 — the renter invests this at 6%/yr
- Owner’s monthly cost = mortgage + 1.1% tax + 1% maintenance + $1,800/yr insurance; renter pays $2,200, rising 3%/yr
- Each month, whoever pays less invests the difference
- After 7 years: sell the home (minus 6% selling costs), repay the loan, and compare both net worths
Common mistakes to avoid
- Comparing rent with the mortgage payment only — owners also pay tax, insurance, maintenance, closing and selling costs.
- Ignoring what the down payment could earn if invested.
- Buying for a short stay: closing and selling costs of 8–10% of the price usually take years to recover.
Frequently asked questions
Is it better to rent or buy?
It depends mostly on how long you stay. Buying has large one-time costs (closing and selling), so it usually needs several years before it beats renting. Use your own rent, price and stay length above.
What is opportunity cost in rent vs buy?
Money tied up in a down payment cannot be invested elsewhere. This calculator assumes a renter invests that money and counts its growth.