Rent vs Buy Calculator

What this calculator actually compares

Most rent-versus-buy arguments compare a mortgage payment to a rent cheque and stop there. That comparison is missing the largest number in the problem: the money you hand over at closing. A down payment and closing costs are not spent, they are moved — out of a brokerage account and into a house. If you rent instead, that money stays invested and earns something. Ignoring that is what makes naive calculators conclude that buying always wins.

So this tool gives both paths the same budget. The renter starts by investing every dollar the buyer spends at closing. Then, month by month, whichever path costs less puts the difference into the same investment account. At the end of each year it asks one question of both: if you sold up and cashed out today, what would you be holding after tax? For the owner that means selling the house, paying the agent, clearing the mortgage and settling any capital gains tax. For the renter it means liquidating the portfolio and paying gains tax on it. Those two numbers are comparable. A mortgage payment and a rent cheque are not.

A worked example

Take the figures the page loads with: a $420,000 home, 20% down, a 6.5% thirty-year mortgage, against $2,200 a month in rent, over a ten-year stay.

Buying needs $96,600 in cash on day one — $84,000 of down payment plus 3% in closing costs. The mortgage payment is $2,124 a month, which looks cheaper than the rent until you add property tax, insurance and maintenance: all in, the first month of owning costs $3,009 against $2,217 to rent.

Owning starts a long way behind and climbs slowly. Three years in, buying is $27,222 worse off — the cost of selling has not been earned back yet. By year five the gap has narrowed to $17,914. Buying finally overtakes renting in year nine, at $7,076 ahead, and finishes the tenth year $14,829 in front, holding $307,604 of equity in a house now worth $592,451. The renter, meanwhile, has paid $306,786 in rent over the same decade — but has a portfolio rather than a house, which is the whole point of the exercise.

Move one number and the answer moves with it. Stay three years instead of ten and buying never catches up, ending $27,222 down. Stay thirty and it finishes $349,828 ahead. Pay $2,800 in rent rather than $2,200 and break-even arrives in year four, ending $122,763 up.

The assumption that decides the answer

It is not the mortgage rate, and it is not appreciation. It is the return you assume on the money you did not put into a house. On the default scenario, dropping that from 6% to 4% brings break-even forward to year six and ends the decade $49,526 ahead. Raising it to 8% means buying never breaks even and finishes $25,751 behind. Same house, same rent, same mortgage — opposite conclusions.

This is worth sitting with, because it means the honest answer to "should I buy?" depends on a number nobody knows. If you would genuinely invest the difference, renting is competitive far longer than folk wisdom suggests. If the money would sit in a current account instead, buying's forced-savings effect is real and the low-return column is the one to read.

Why a smaller down payment usually loses

Putting 5% down on the same house cuts the cash you need to $33,600, which sounds like a win. But the loan is bigger, so the payment rises to $2,522, and below 20% equity the lender charges private mortgage insurance — here for 120 months, the entire stay, pushing the first month of owning to $3,573. Over ten years that scenario never breaks even, finishing $20,350 behind. PMI stops when the balance falls to 80% of the purchase price, not of today's appraisal, so a rising market does not end it early.

The tax result that surprises people

Switch the tax layer on and the ten-year outcome changes from −$968 to +$14,829. Almost none of that comes from the mortgage interest deduction. On these defaults a married-joint filer's itemized deductions total roughly $30,370 against a $32,200 standard deduction — so itemizing is worth nothing at all, and the tool says so rather than showing a bare $0.

The benefit is somewhere else entirely: when you sell your main home, the first $250,000 of gain is excluded from tax if you are single, or $500,000 filing jointly. The renter's investment gains carry no such exemption. That exclusion, and not the mortgage deduction, is the real tax advantage of owning — and it is conditional. You must have owned and lived in the home for two of the previous five years, so a stay under two years is taxed on the whole gain. The tool applies that rule.

Change your filing status and the picture shifts again. A single filer with no state income tax clears the smaller $16,100 standard deduction easily, collects $17,245 of itemizing benefit over the stay, and breaks even in year six instead of nine.

What it does not model

Whole years only, so a thirty-month stay must be entered as two or three. Figures are nominal rather than inflation-adjusted. The tax layer is US federal only — switch it off if that does not apply to you, which is more honest than leaving it on and wrong. It applies the full SALT cap without the high-income phase-down, since the tool never asks your income, and it uses a single capital gains rate rather than brackets for the same reason. Capital improvements are not added to your cost basis, which makes the taxable gain on sale slightly pessimistic.

Above all, it cannot price the things that actually decide most moves: whether you want to repaint the kitchen without asking, how much you would mind being told to leave in ninety days, or what a school catchment is worth to you. Treat the number as one input among several.

Related tools

For the mortgage on its own — the full amortization schedule, extra payments and what they save — use the Loan & Mortgage Calculator. To explore the investing side of this comparison by itself, the Compound Interest Calculator shows what regular contributions grow into. Once you have decided, the Budget Tracker handles the monthly reality of either choice, and the Paycheck & Salary Calculator tells you what you actually have to work with.