| Monthly Buying Payment: | $'+totalMonthlyBuy.toLocaleString(undefined,{maximumFractionDigits:2})+' |
| Total Spent Buying (w/ Down): | $'+totalBuySpent.toLocaleString(undefined,{maximumFractionDigits:0})+' |
| Estimated Home Equity After '+duration+' yrs: | $'+netEquity.toLocaleString(undefined,{maximumFractionDigits:0})+' |
| Net Cost of Buying: | $'+netBuyCost.toLocaleString(undefined,{maximumFractionDigits:0})+' |
| Total Rent Paid: | $'+totalRentCost.toLocaleString(undefined,{maximumFractionDigits:0})+' |
Using the Rent vs. Buy Calculator
Deciding whether to continue renting or to purchase a home is one of the most significant financial decisions you will ever make. Our rent vs buy calculator helps you look beyond the monthly payment to see the long-term wealth impact of both choices. By entering your specific local data, you can see exactly where the "break-even" point lies for your situation.
To get an accurate result, ensure you provide realistic estimates for property taxes and home appreciation in your specific neighborhood.
- Home Purchase Price
- The total sales price of the home you are considering.
- Down Payment (%)
- The percentage of the home price you pay upfront. 20% is standard to avoid PMI, but many buyers enter with 3% to 5%.
- Monthly Rent Comparison
- What you would pay monthly for a comparable rental property, including renter\'s insurance.
- Home Appreciation Rate
- The annual percentage you expect the home value to increase. Historically, this averages around 3-4% nationally.
How the Rent vs. Buy Math Works
Renting is often called "throwing money away," but buying has "sunk costs" too, such as interest, taxes, and maintenance. The rent vs buy calculator uses a net-cost formula to compare the two. Here is the logic:
Net Buying Cost = (Total Payments + Maintenance + Taxes + Closing Costs) – (Future Value – Remaining Loan – Selling Costs)
- Sunk Costs of Buying: Mortgage interest, property taxes, home insurance, and maintenance (usually estimated at 1% of home value per year).
- Sunk Costs of Renting: Monthly rent and renter\'s insurance.
- Equity Gain: The portion of your mortgage payment that goes to principal, plus the appreciation of the home value over time.
- Opportunity Cost: The money used for a down payment could have been invested in the stock market instead.
Calculation Example
Scenario: You are looking at a $400,000 house versus a $2,500 monthly rent. You plan to stay for 5 years.
Buying Breakdown:
- Down Payment (20%): $80,000
- Monthly Mortgage (6.5%): ~$2,022
- Monthly Tax/Insurance/Maint: ~$750
- Total spent over 5 years: ~$246,320 (including down payment)
- Equity after 5 years (3% appreciation): ~$145,000 (after selling costs and paying off loan)
- Net Cost: $101,320
Renting Breakdown:
- Monthly Rent: $2,500
- Total spent over 5 years: $150,000
- Net Cost: $150,000
In this example, using the rent vs buy calculator shows that buying saves you approximately $48,680 over a 5-year period due to equity buildup and home appreciation.
Common Questions
When is renting better than buying?
Renting is typically better if you plan to stay in a home for less than 3 to 5 years. This is because the high upfront costs of buying (closing costs, which are 2-5% of the price) and the costs of selling (agent commissions, usually 6%) don\'t have enough time to be offset by equity growth.
What is the 5% rule?
The 5% rule is a quick benchmark: if the annual cost of renting is less than 5% of the home\'s value, renting might be the better financial move. This 5% accounts for property tax (1%), maintenance (1%), and the cost of capital (3%).
How does inflation affect the decision?
Inflation generally favors buyers. While a mortgage payment is usually fixed for 30 years, rents tend to rise with inflation. Over 10-20 years, a fixed mortgage payment becomes much "cheaper" in real dollars, while rent becomes more expensive.