Rent vs Buy Calculator

How this rent vs buy calculator works

This rent vs buy calculator compares two simplified scenarios over a time horizon you choose. In the buying scenario, you purchase a home with a mortgage, pay property taxes, homeowners insurance, HOA dues, and a maintenance reserve, and your home value grows according to an annual appreciation rate. In the renting scenario, you continue renting, your rent rises with an annual inflation rate, and you invest the money you would have used for the down payment, closing costs, and any yearly savings when renting is cheaper than owning.

What costs are included when you own a home?

Owning a home involves more than just the principal and interest portion of your mortgage payment. This calculator includes estimated monthly principal and interest, annual property taxes based on the home value, homeowners insurance, HOA dues (if any), and a simple maintenance allowance as a percentage of the property value. It also spreads buyer closing costs over the analysis horizon so you can see how they affect your effective annual cost. The goal is not to model every expense perfectly, but to capture the major components that drive long-term affordability.

At the end of each year, the calculator tracks how much mortgage principal you have repaid, how much interest you have paid, and how much equity you have built as the home appreciates. When estimating net worth, it subtracts selling costs (for example real estate commissions and fees) from the home's estimated value so you see what you might walk away with if you sold at that point.

How investing the down payment changes the math

In the renting path, the tool assumes you invest the would-be down payment and closing costs from day one. It then adds additional contributions in any year where renting is cheaper than owning, compounding those investments at the rate you enter. This lets you compare the equity you might build in a home with the portfolio you could accumulate by staying a renter and investing the difference. Because investment returns are uncertain, you can test multiple scenarios by moving the return slider.

The comparison chart shows two lines: projected net worth if you buy (home equity minus estimated selling costs) and net worth if you keep renting (your investment balance). Where these lines cross, the tool marks a break-even year, showing roughly when buying becomes better or worse than renting in terms of wealth.

Limitations: what this calculator cannot predict

No calculator can perfectly answer the question “should I rent or buy a house?” Real life includes changing incomes, job moves, unexpected repairs, interest-rate shifts, and tax rules that vary by country and even by household. This tool intentionally ignores income taxes, mortgage interest deductions, and capital gains rules so that the math stays transparent and comparable across locations. It also assumes your lifestyle and credit remain stable and that you can actually qualify for the mortgage described.

Think of this as a home affordability calculator for intuition, not a definitive answer. It helps you see how different appreciation rates, rent inflation, and investment returns affect the long-term tradeoffs between renting and buying. Use it as one input among many when making housing decisions, ideally alongside advice from a financial planner or housing counselor who understands your full situation.