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Rent vs. Buy
Compare buying against renting and investing the difference — and find the year buying pulls ahead, if it does.
The house
Renting instead
The three guesses
Those last three are guesses about the future, and the answer moves further on them than on anything above. On the default figures, assuming 1% appreciation puts the break-even year at 25; 3% puts it at 13; 5% puts it at 4. Move them and see.
Under 20% down means mortgage insurance, and it is in the figures above. It is not forever: it comes off automatically once you owe less than 78% of what you paid — about 0 years in on these numbers — and you can ask for it to come off at 20% equity.
What this means
On these numbers, renting leaves you about $19,413 better off after 7 years. Buying does not catch up inside 40 years here, which usually means the rent is low against the price, or the costs of getting in and out are eating the gain.
Read that as a direction, not a verdict. The comparison rests on three numbers nobody knows: what the house does, what your savings do, and what rent does. It also assumes the house moves smoothly, and housing does not — the year you sell matters more than the average says.
Two things the model leaves out, and they lean opposite ways. It charges no tax on the renter’s investment gains, which flatters renting. And it ignores the mortgage interest deduction, which would flatter buying for the households that itemize — most do not, which is why it is left out rather than guessed at. Property tax here is figured on the home’s rising value; several states cap how fast an assessment can climb, so if you are in one of those, this overstates the tax.
The part no calculator reaches: renting buys you the ability to leave. Owning buys you a payment that stops moving and a place nobody can ask you to vacate. Those are worth real money to different people, and neither shows up in the number above. Somebody who has to move for work in three years and somebody putting a kid through one school district can look at the identical figures and both be right.
Build on it
These are estimates to help you think — not personalized legal, tax, or investment advice, and not a promise of any result.
Two people, the same money, the same job. One buys a house; the other rents and invests what they did not spend on it. This calculator runs both for as long as you say you would stay, and shows who is further ahead at the end — and the year buying pulls in front, if it does.
That year is the answer, not a verdict. Buying costs a lot to get into and a lot to get out of, and only time pays that back. So the honest output is a horizon: stay longer than this and buying wins on these numbers, leave sooner and it does not.
How to use it
Start with how long you'd stay
It is the first field because it decides more than anything else on the page. Be honest rather than hopeful: think about your work, your family, and whether you would still want this house in ten years, not whether you could imagine staying.
Price the house properly
Not just the mortgage. Property tax, insurance, upkeep and any HOA dues are what turn an affordable payment into an unaffordable house, and they do not stop when the loan does. If you are under 20% down, leave the mortgage insurance figure in — it is real money for the first several years.
Use the rent you would actually pay
The rent on the place you would live in instead, not the cheapest listing in town. If you would rent something smaller, use that number and read the result knowing you are comparing two different lives.
Then move the last three numbers around
How much the home goes up in value, what your savings earn, and the cost of selling are guesses. Change them one at a time and watch the break-even year jump. If it swings from year 4 to year 25 across reasonable guesses, that tells you the honest answer is "it depends" — which is worth knowing before you sign anything.
Behind the numbers
Both sides invest the difference
You start with the same money whichever way you go. Rent, and you invest what you did not hand over at closing. Buy, and in any month owning costs you less than renting would have, you invest that difference instead. Most rent-vs-buy calculators only credit the renting side, which quietly tilts the whole comparison. This one runs it both ways, because a model that only pays one side is an argument wearing a calculator's clothes.
The costs of getting in and out are the reason time matters
Closing costs when you buy, agent commissions and the rest when you sell — together often close to a tenth of the price, paid at the two ends. Rent has none of that. That is the hole buying starts in, and appreciation and principal have to fill it before you are level. Sell too early and you have paid for the privilege of moving.
Building equity is not the same as building wealth
Every payment does put something into the house, but early on most of it is interest, and none of it is money you can spend. Equity is real and you cannot get at it without selling or borrowing against it. Put the same money in an index fund instead and you have something less satisfying to look at and much easier to reach in a bad month.
Mortgage insurance ends
Under 20% down you pay for insurance that protects the lender, not you. It is not permanent: it comes off automatically once you owe less than 78% of what you paid, and you can ask for it to come off at 20% equity. Modelling it as forever would overstate the cost of buying with a small down payment, which is the situation most first-time buyers are actually in.
What the number cannot see
Renting buys you the ability to leave. Owning buys you a payment that stops moving and a place nobody can ask you to vacate. Both are worth real money to you and neither is in the arithmetic, so the number above cannot settle it. Somebody who may have to move for work in three years and somebody keeping a kid in one school district can read identical figures and both be right.
The math behind it
It is a net-worth race, run month by month. Both people start with the same cash — the down payment plus closing costs. The buyer spends it; the renter invests it. Each month, whoever's housing costs less puts the difference into the same assumed investment. The buyer's home value and loan balance move, the renter's portfolio grows, rent rises. At the end of each year the buyer's position is what the house would sell for, minus the cost of selling, minus what is still owed, plus anything they invested. The renter's is their portfolio. Whoever is higher is ahead, and the break-even year is the first year the buyer is ahead and stays ahead.
Worked example
A $300,000 house, 10% down at 6.5%, against $1,800 rent — with 3% appreciation, 3% rent growth and 7% on savings. The check at closing is $39,000. Owning runs $2,505 in month one against $1,820 to rent. At year 7 the renter is ahead by $19,413; buying does not pull in front until year 13.
Run it twice
The one habit worth taking from this page: never accept a single rent-vs-buy answer. On the worked example, assuming 1% appreciation puts the break-even year at 25. Assume 3% and it is year 13. Assume 5% and it is year 4. Nothing about the house changed — only a guess about the future did. If your answer swings that far across guesses you consider reasonable, the honest conclusion is that the numbers do not decide it, and the rest of your life does.
Common questions
Is it cheaper to rent or buy?
Month to month, renting is usually cheaper — a mortgage payment is only part of what a house costs, and tax, insurance and upkeep push owning well above the equivalent rent. Over enough years, buying tends to pull ahead, because rent keeps rising and a fixed mortgage payment does not, and because you end up owning something. Where "enough years" falls is what this calculator works out on your numbers.
How long do I need to stay in a house to make buying worth it?
There is no single number, and the common rules of thumb tend to be more optimistic than this model comes out. On the worked example above — a $300,000 house, 10% down, against $1,800 rent — buying does not pull ahead until year 13. Change the assumed appreciation and that moves to year 25 or year 4. Run your own figures and, more importantly, run them twice with different guesses.
Am I throwing money away on rent?
No, and the phrase does more damage than almost any other in personal finance. Rent buys you somewhere to live, the same way a mortgage payment's interest portion does — and in the early years of a loan, most of the payment IS interest. You are also not paying for a roof, a water heater, property tax or the cost of selling. Renting can be the wrong choice for you and still not be throwing money away.
What does this calculator leave out?
Three things, and they lean in different directions. It charges no tax on the renter's investment gains, which flatters renting. It ignores the mortgage interest deduction, which would flatter buying for the households that itemize — most do not, which is why it is left out rather than guessed at. And it moves the home's value smoothly at one rate, while real housing does not; the year you happen to sell matters more than an average suggests.
Should I buy a house to build wealth?
A house is somewhere to live that may also grow in value. Treating it primarily as an investment is how people end up buying more house than they want, in a place they would not otherwise choose, at a time that does not suit them. Buy it because you want to live there and the numbers work. If the numbers here say renting wins and you want the house anyway, that can be a fine decision — just make it knowing what it costs.
Sources & references
Go deeper
The calculator gives you a number. The Home Ownership & Real Estate Brick teaches you what to do with it, in plain English. And if you’re not sure where to start, the free BrickScore Assessment checks your whole foundation in about 5 minutes.