Rent vs Buy Calculator

Compare the true cost of renting vs buying a home. Find your breakeven point and see which option builds more wealth over your time horizon.

Renting

Buying

Assumptions

After 7 years, you're better off...

Renting

by $10,722 in net wealth

Renting Summary

Monthly Rent (Starting)
$1,800
Total Rent Paid
$165,509
Down Payment Invested(at 8.0%)
$70,000
Net Wealth (Investments)
$188,012

Buying Summary

Monthly Mortgage P&I
$1,770
Monthly Total Cost(P&I + tax + ins + maint)
$2,482
Total Housing Cost
$213,381
Net Wealth (Equity + Investments)
$177,290

Net Wealth: Renting vs Buying

Model your complete housing decision

Renting wins by $10,722 over 7 years. See how this decision fits into your full financial plan — income, savings, investments, and retirement.

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The True Cost of Homeownership

Buying a home involves much more than a mortgage payment. The full cost of homeownership includes principal and interest on your mortgage, property taxes (typically 0.5-2.5% of home value annually), homeowner's insurance ($1,000-$3,000+ per year), maintenance and repairs (the general rule is 1% of home value per year), and potentially PMI if your down payment is less than 20%.

There's also the opportunity cost of your down payment. That $50,000-$100,000+ sitting in your house could be invested in the stock market, potentially earning 7-10% annually. Over a decade, that opportunity cost adds up to tens of thousands of dollars in foregone investment returns.

Hidden Costs Most Buyers Overlook

Beyond the obvious costs, homeownership comes with several expenses that catch many buyers off guard:

Closing costs (2-5% of home price) including lender fees, title insurance, appraisal, inspection, and transfer taxes. On a $350,000 home, that's $7,000-$17,500 out of pocket on day one.

Major repairs and replacements. A new roof costs $8,000-$15,000. HVAC replacement is $5,000-$12,000. Plumbing emergencies and appliance failures are inevitable.

HOA fees of $200-$800+ per month for condos or planned communities, and these tend to increase over time.

Lost investment returns. The money in your down payment, closing costs, and monthly cost difference could all be earning compound returns in the stock market.

Selling costs (5-6%) in real estate agent commissions. On a $400,000 sale, that's $20,000-$24,000 in fees alone.

When Renting Makes More Financial Sense

Despite the cultural narrative that buying is always better, renting is often the smarter financial choice in several scenarios:

Short Time Horizons

Under 5 years, the upfront costs of buying — closing costs, moving expenses, and interest-heavy early mortgage years — make buying a losing proposition.

Expensive Housing Markets

In cities where price-to-rent ratios exceed 20:1, renting and investing the difference almost always wins. San Francisco, New York, and Seattle are prime examples.

High Mortgage Rates

When rates are 7%+, a much larger portion of your payment goes to interest rather than building equity, heavily favoring renting.

Career Flexibility Needed

If your career may require relocation within a few years, the 7-10% combined transaction costs of buying and selling make renting far more practical.

Strong Investment Discipline

The rent vs buy math only favors renting if you actually invest the difference. If you'd spend the savings, buying acts as forced savings through equity building.

Factors That Shift the Rent vs Buy Decision

The rent vs buy decision is highly sensitive to several key variables. Small changes in these inputs can flip the answer entirely:

Mortgage Interest Rates

A 1% change affects your monthly payment by roughly $60-$70 per $100,000 borrowed. At 4%, buying is attractive in most markets. At 8%, the math becomes much harder.

Home Price Appreciation

The default 3% annual appreciation is a reasonable long-term average, but local markets vary wildly. Some appreciate 5-8% annually during booms, while others stagnate.

Rent Growth Rate

If rents are increasing 5%+ annually, buying provides a hedge against rising housing costs since your mortgage payment is fixed.

Investment Returns

Higher expected investment returns favor renting. Conservative investors earning 4-5% may find home equity building comparatively better.

Tax Benefits

Mortgage interest deduction can benefit buyers, but only if you itemize deductions. For most people, the tax benefit is smaller than commonly believed.

Model Your Complete Housing Decision

This calculator compares renting vs buying in isolation. Trajectoryy's full simulator shows how your housing choice impacts your entire financial life — cash flow, savings rate, investment growth, retirement timeline, and more — giving you the full picture before you make one of life's biggest financial decisions.

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Frequently Asked Questions

Is it always better to buy a home than rent?
No. Whether buying or renting is better depends on many factors: how long you plan to stay, local home prices vs. rents, mortgage rates, investment returns, and your personal financial situation. In expensive markets with high home prices and low rent-to-price ratios, renting and investing the difference often wins — especially for time horizons under 5-7 years.
What is the breakeven point for buying vs renting?
The breakeven point is the year at which buying becomes financially better than renting. This typically ranges from 3 to 10 years depending on your inputs. Before the breakeven point, the upfront costs of buying (down payment, closing costs) and ongoing homeownership expenses outweigh the equity you build. After the breakeven point, home equity and appreciation start to outpace what you would have earned by investing as a renter.
What costs does this calculator include for buying?
This calculator includes: monthly mortgage principal and interest, property taxes, homeowner's insurance, annual maintenance costs (typically 1% of home value), and PMI (private mortgage insurance) if your down payment is less than 20%. It also factors in home appreciation (typically 3% per year) and the opportunity cost of tying up your down payment in a house instead of investing it.
How does the opportunity cost of a down payment work?
When you buy a home, your down payment is locked in the property. If you rented instead, that same money could be invested in the stock market earning 7-10% annually. This 'opportunity cost' is a major factor in the rent vs buy decision. For example, a $70,000 down payment invested at 8% for 10 years would grow to about $151,000 — that's $81,000 in potential gains you give up by buying.
What investment return rate should I use?
The historical average annual return of the S&P 500 is about 10% before inflation (7% after inflation). A conservative estimate of 7-8% is commonly used for long-term investment projections. If you'd invest in a more conservative mix of stocks and bonds, you might use 5-6%. The higher the investment return you assume, the more favorable renting becomes since you're earning more on the invested down payment.
Why doesn't this calculator include closing costs or selling costs?
For simplicity, this calculator focuses on the core ongoing costs and wealth building of each option. In reality, buying a home involves 2-5% closing costs upfront, and selling involves 5-6% in agent commissions and fees. These additional costs make buying even less attractive for shorter time horizons. Consider adding 3-5% to your down payment to mentally account for closing costs.
How does the time horizon affect the rent vs buy decision?
Time horizon is one of the most important factors. The longer you stay, the more buying tends to win because: (1) you spread the upfront costs over more years, (2) you build more equity as your mortgage balance decreases, and (3) home appreciation compounds over time. For stays under 3-5 years, renting almost always wins. For stays over 7-10 years, buying usually wins unless you're in an extremely expensive market.

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