Renting vs. Buying: What This Calculator Measures
The rent vs. buy decision is one of the most important financial choices you'll make. This calculator goes beyond the simple "is buying always better?" question by accounting for opportunity costs, appreciation, and cumulative costs over time.
What's Included in the Buying Cost
- Mortgage payments (principal + interest)
- Property taxes (as % of home value)
- Homeowners insurance (~0.5% annually)
- Maintenance (1% of home value annually)
- Closing costs (estimated 3% upfront)
- Minus: home equity built (principal paydown + appreciation)
- Minus: opportunity cost of down payment invested instead
The Break-Even Point
In the short term, renting is almost always cheaper — you avoid closing costs, don't tie up capital in a down payment, and skip maintenance expenses. But over time, buying builds equity while rent keeps rising. The break-even point is where cumulative ownership costs (net of equity) equal cumulative rental costs.
If you plan to stay longer than the break-even point, buying typically makes financial sense. If you might move sooner, renting may be smarter.
Non-Financial Factors
The financial comparison doesn't capture everything. Renting offers flexibility and freedom from maintenance. Buying offers stability, the ability to renovate, and potential inflation protection. Your personal situation, career plans, and lifestyle preferences matter as much as the numbers.