Rent vs. Buy Calculator

Home Purchase
Home Price
Down Payment
Interest Rate
Loan Termyears
Buying Closing Costs
Property Tax / year
Property Tax Increase / year
Home Insurance / year
HOA Fee / year
Maintenance Cost / year
Home Value Appreciation / year
Cost/Insurance Increase / year
Selling Closing Costs
 
Home Rent
Monthly Rental Fee
Rental Fee Increase / year
Renter's Insurance / month
Security Deposit 
Upfront Cost 

Your Information
Average Investment Return
Marginal Federal Tax Rate
Marginal State Tax Rate
Tax Filing Status:

Result

Buying is cheaper if you stay for 4.2 years or longer. Otherwise, renting is cheapter.

The following is the average cost based on the length you stay for the next 30 years.

Staying LengthAverage Buying CostAverage Renting Cost
MonthlyAnnualMonthlyAnnual
1 Year$5,134$61,606$2,086$25,032
2 Years$3,227$38,726$2,154$25,849
3 Years$2,622$31,464$2,226$26,711
4 Years$2,343$28,121$2,301$27,607
5 Years$2,196$26,357$2,378$28,535
6 Years$2,116$25,393$2,458$29,496
7 Years$2,075$24,895$2,541$30,489
8 Years$2,058$24,698$2,626$31,517
9 Years$2,059$24,708$2,715$32,579
10 Years$2,073$24,870$2,806$33,678
11 Years$2,096$25,152$2,901$34,814
12 Years$2,127$25,528$2,999$35,989
13 Years$2,165$25,984$3,100$37,203
14 Years$2,209$26,509$3,205$38,459
15 Years$2,258$27,096$3,313$39,758
16 Years$2,312$27,738$3,425$41,100
17 Years$2,369$28,433$3,541$42,489
18 Years$2,431$29,176$3,660$43,924
19 Years$2,497$29,967$3,784$45,408
20 Years$2,567$30,803$3,912$46,943
21 Years$2,640$31,685$4,044$48,530
22 Years$2,718$32,610$4,181$50,170
23 Years$2,798$33,581$4,322$51,867
24 Years$2,883$34,595$4,468$53,621
25 Years$2,971$35,655$4,620$55,434
26 Years$3,063$36,760$4,776$57,310
27 Years$3,159$37,910$4,937$59,249
28 Years$3,259$39,108$5,104$61,253
29 Years$3,363$40,354$5,277$63,327
30 Years$3,423$41,073$5,456$65,470

RelatedMortgage Calculator | House Affordability Calculator


Important: Our Rent vs. Buy Calculator is intended for use by US residents only. Foreigners may still use the calculator but beware of differences. For instance, Canadian mortgages compound semi-annually. We strive to give users the best results possible based on many assumptions, but because our calculator cannot accurately predict the future, there are no guarantees.

To rent or buy? This is the all-important, life-changing question every potential home owner will eventually come face-to-face with. For our Rent vs. Buy Calculator, the decision is evaluated from a purely financial standpoint. In the real world, there are other human elements involved in the Rent vs. Buy question that numbers cannot have a say in, such as the intangible value of home ownership and not having to deal with landlords. Sometimes, people just want the ability to paint their walls a certain color or house thirteen cats without catching flack. Others might like the peace of mind that comes with a predictable monthly rent as opposed to wild fluctuations in home value.

Quick Tip 1: Please keep nonfinancial factors in mind when deciding to buy or rent, but don't overly rely on emotion. Let our Rent vs. Buy Calculator handle the brunt of the logical and financial factors!

To Buy

Home ownership is a fairly new reality in society. It was only midway through the twentieth century when becoming a home owner became easier for the average Joe and not just the wealthy . In modern times in the US, there is strong bias towards home ownership because owning a home is as American as bald eagles and hotdogs. The federal government even puts in place tax incentives for home owning, a stronger reason not to rent. Most importantly, home ownership instills pride and is synonymous with the image of success and responsibility, and what sane person wouldn't want to be portrayed as such in society?

There is also the modern, prevalent belief that a mortgage builds equity. With all of these things in mind, it can be easy to see on the surface why buying seems to make more sense than renting.

One problem though! While a mortgage can technically build equity, it isn't much. Here's a good illustration: home prices in many areas around the US have doubled since the 2009 crash to 2017. Pretty good, right? But wait a minute... in that same period of time, the total US stock market tripled. Still seem like a good investment? To top it all off, in a study by leading economist Robert Shiller of home prices in the twentieth century, the average appreciation for home prices after inflation adjustment was only 0.2%. After yearly maintenance/repairs and annual property taxes amongst other things, most homeowners will see that their home values simply break even.

Generally speaking, owing a home is comparatively equivalent to a low risk, moderate reward type of financial instrument. Unless you happened to buy a loft in downtown San Francisco in 1999 and sold in 2006. When it's all said and done, it is best for most people to approach primary home ownership with the mentality of it being an investment in family, long-term stability, happiness, and a shelter over heads, not as a speculative way to increase the dollar amount of their total assets.

The four biggest costs associated with home ownership are called PITI, which spells out principal, interest, taxes, and insurance, perfectly in descending order by amount. There are other costs also, but this abbreviation is commonly used to remember the biggest ones.

P – Principal. One part of the monthly mortgage payment, but a big chunk in PITI if not the biggest. This is the amount borrowed from the lender that goes towards building that highly sought after equity of the home. It is the only part of 'PITI' that builds equity. Just like how rent is usually described, the other three parts are technically also money 'flushed down the drain'. Because a humongous portion of the earliest scheduled mortgage payments go towards the 'ITI' parts instead, it would make better sense to buy when the intent to own the home is long term.

I – Interest. Second part of the monthly mortgage payment, this is the interest on the principal, usually expressed as annual percentage rate or APR. This part is tax deductible, don't forget during tax season!

T – Taxes. The property tax is an annual fee paid to the home's town, city, county, or ruling jurisdiction. It is possible to get a ballpark figure of the annual property tax due for any home by going to the website of the ruling jurisdiction, where the information is usually public. In most places, homeowners are expected to pay between 1 to 3% of the home value. The Rent vs. Buy Calculator requires both the annual amount in tax due each year along with a forecasted percentage increase for more accurate results.

Quick Tip 2: In most states, property taxes are calculated based on the appraisal values of the homes. Because appraised values are most likely computer generated and not assessed by humans, for some homeowners, it is definitely worth appealing to the ruling jurisdiction to try and get a lower appraised value for a lower property tax.

I – Insurance. Lenders normally require buyers to get homeowners insurance for disasters like hurricanes and fires. Some owners also purchase homeowners' warranty. In addition, traditional home loans with down payments less than 20% will normally require private mortgage insurance (PMI), which protects lenders in case of defaults. Only when the loan-to-value ratio (LTV) reaches 80% can the lender be asked to discontinue coverage. They are legally required to after 78% of LTV is reached, assuming all payments in the past two years were timely. It is usually 0.3 to 1.3% of the total annual mortgage cost. It is possible to opt for lender-paid mortgage insurance instead. For LPMI, the lender pays for the insurance and the borrower pays it back slowly at higher interest rates over the length of the loan. It usually results in higher costs at the end.

To Rent

The common saying that 'renting is the equivalent of flushing money down a drain' or some other similar alternative makes sense in the context of the financial world, but it is greatly exaggerated when discussing the decision to rent or buy. As shown above, a buy decision can also be described as 'flushing money down the drain'. Just because one part of a mortgage builds equity does not discount the other three parts as not flushing money down the drain, subconsciously painting the unfair image of mortgages as healthy investments and rent as not. Many hopeful homeowners will be surprised to learn that the sum of all costs associated with owning a home is more than what it would cost to simply rent instead, especially if the home ownership lasts only for a short period of time.

It is thus very possible from a financial perspective to rent instead, especially for younger folks whose futures are more clouded with uncertainty. Uncertainty requires flexibility, and a mortgage is possibly one of the most illiquid, brick investments around, a place where opportunity costs go to die. They are an expensive, relentless, siphoning of cash on their owners, keeping them chained around the ankles for quite a long time.

Valuable notes regarding renting:

Big Factors

When it comes to the big decision, the four following figures are critical. It is always encouraged to input assumptions into any of our calculators as accurately as possible, but for these, it is highly suggested to mull over the details when coming to a concrete number.

Small Factors

Though they may not be as critical to the process as the four variables above, there are many smaller factors that should be acknowledged for the calculator to compute the most accurate results.

A list of some notable costs aside from the purchase price of the home itself that are packaged into home ownership includes:

Rent on the other hand, is a bit simpler with its costs. Aside from the rent itself, costs to take note of are: