How the comparison works
A fair rent-vs-buy comparison can't just stack rent against a mortgage payment. It has to account for everything that leaves your pocket and everything you get back. This calculator computes a net cost for each path over the years you plan to stay, then tells you which is lower.
Net cost to buy = up-front cash + payments + taxes + upkeep − money back from selling
On the buying side, that means your down payment, closing costs (assumed at 3% of price), every mortgage payment, property tax, maintenance and insurance — minus the proceeds when you sell, after about 6% in selling costs and paying off the remaining loan. Taxes and upkeep grow each year along with the home's value.
Net cost to rent = total rent paid − investment growth on the cash you didn't tie up
On the renting side, you pay rent that rises each year, but the down payment and closing costs you didn't spend get invested at your chosen return rate. Crediting that growth is what makes the comparison honest.
Why the time horizon is everything
Buying carries heavy one-time costs: closing fees on the way in and agent commissions on the way out. Spread over two or three years, those costs dominate and renting usually wins. Stretch the stay to seven or ten years and the equity you build plus appreciation typically pull buying ahead. Adjust the "years you'll stay" input to find your personal break-even point.
The price-to-rent ratio shortcut
For a quick gut check, divide the home price by the annual rent. A price-to-rent ratio under about 15 tends to favor buying, while a ratio above 21 tends to favor renting. It's only a rule of thumb — your mortgage rate, how long you stay, and investment returns can easily flip the answer, which is what the full calculation above captures.
Frequently asked questions
Is it cheaper to rent or buy a house?
It depends on how long you stay, the price-to-rent ratio in your area, your mortgage rate, and what return you could earn by investing the cash instead. Buying usually wins over longer periods because you build equity and benefit from appreciation, while renting often wins over short stays where transaction costs dominate. This calculator compares the full net cost of each over the years you choose.
What is the break-even point for buying a home?
The break-even point is the number of years you must stay for buying to cost less than renting, once you account for closing costs, selling costs, mortgage interest, taxes, maintenance, appreciation, and the opportunity cost of your down payment. For many markets it lands somewhere between three and seven years, but it varies widely — extend the "years you will stay" input until buying and renting cost about the same.
Why does the calculator include investment returns?
Because buying ties up a large down payment and closing costs that a renter could invest instead. To compare fairly, the tool assumes a renter invests that up-front cash at your chosen return rate and counts the growth as a benefit of renting. Ignoring this would unfairly favor buying.
What costs of owning a home are easy to forget?
Beyond the mortgage, owning means property taxes, homeowners insurance, ongoing maintenance and repairs (often estimated near 1% of the home value per year), and the roughly 6% in agent and closing costs you pay when you sell. The calculator builds these in so the comparison is realistic.
Does building equity make buying automatically better?
Not always. Equity from paying down principal and from appreciation is real, but in the early years most of your mortgage payment is interest, and selling costs eat into appreciation. If you move within a few years, those costs can outweigh the equity you build, making renting the cheaper option.
Disclaimer: This is a simplified model for comparison only. It assumes 3% buying closing costs, 6% selling costs, taxes and upkeep that grow with the home's value, and that a renter invests the equivalent up-front cash. It ignores income-tax effects (such as mortgage-interest or property-tax deductions), PMI, HOA dues, and rent deposits. It is not financial advice.