Rent vs. Buy Calculator

Companion guide: Rent vs. buy: how the simulation works steps through the month-by-month model with several horizons computed. This page covers what the calculator above compares, why each input matters, how to read the result, and where the model stops. The other explainers are listed under all guides.

What actually gets compared

The calculator keeps two running totals over the number of years you say you will stay. The renting total is every rent payment across that horizon, with the rent raised once a year by the rent-growth rate you enter. The buying total is the down payment, any purchase closing costs you enter (cash at purchase, not financed), every mortgage payment, and ownership costs taken as an annual percentage of the home's value — minus the net sale proceeds at the end of the horizon: the appreciated price, less selling costs, less whatever loan balance remains after the actual amortization. The lower net cost is reported as the cheaper option. Only purchase closing costs stay at zero until you enter them. The four optional percentages — rent growth, ownership costs, appreciation and selling costs — fall back to the defaults printed on their labels when left blank, so enter your own figures rather than relying on them.

The headline example reads like this. Rent of $2,000 a month growing 3% a year is set against a $350,000 home bought with $70,000 down on a 30-year mortgage at 7%, with ownership costs of 2% of the home's value a year, appreciation of 3% a year, selling costs of 6% of the sale price, a 7-year stay, and purchase closing costs left blank. The loan is $280,000, and the amortized payment on it — computed with the same function the rental property calculator uses — is $1,862.85 a month. Over 7 years the renter pays $183,899. The buyer's gross outlay (down payment, payments and ownership costs together) is $280,116, but the sale at the end returns $149,416 after selling costs and the remaining balance, so the net cost of buying is $130,701 and buying is cheaper by $53,198. Every figure on this page is computed at build time by the same tested engine that runs the calculator, from the inputs named in the sentence around it.

The formula chain, month by month

The comparison is a simulation, not a closed formula, and it runs one month at a time. On the renting side each month adds the current rent to the total; at every twelfth month the rent is multiplied by one plus the rent-growth rate, and that raised figure applies for the next twelve. In the headline example the first year costs $24,000 — twelve payments of $2,000 — and the second year's rent steps up to $2,060.00 a month, so the two-year total is $48,720. The raise happens once at each anniversary, not a little every month.

On the buying side each month does four things. It charges interest on the current balance at one twelfth of the annual rate; it applies the rest of the fixed payment to principal, so the balance falls; it adds one twelfth of the ownership-cost percentage times the current home value; and at each anniversary it multiplies the home value by one plus the appreciation rate. Because interest is charged on the balance, the interest share of each payment is highest at the start, when the balance is largest, and shrinks as principal is repaid — which is why equity builds slowly at first. When the horizon ends the model sells: the sale price times one minus the selling-cost percentage, less the remaining balance, is the net sale proceeds. The net cost of buying is then the down payment plus purchase closing costs plus all payments plus all ownership costs, minus those proceeds. A 0% mortgage rate is handled by dividing the loan evenly across the term's months rather than through the amortization formula. The simulation guide follows one example through these steps in order.

Why each input matters

Rent and rent growth touch only the renting column. Hold every other headline input and set rent growth to 0% and the renter's total falls to $168,000; set it to 5% and the total rises to $195,408. The buying side is $130,701 in both runs, unchanged. The verdict moves with the gap: at 0% growth buying is cheaper by $37,299, at 5% buying is cheaper by $64,708.

Home price, down payment, rate and term set the loan and the payment. The down payment is counted as cash out on day one, but it is not lost: it returns through the equity in the sale proceeds, less whatever selling costs and any shortfall in appreciation take from it. Two edge cases show the mechanics. Enter rent of $1,500 growing 2% a year against a $240,000 home with $48,000 down at a 0% rate over 15 years, 2% ownership costs, 2% appreciation, 6% selling costs and a 10-year stay: the $192,000 loan is repaid in equal monthly slices with no interest, the renter pays $197,095, the net cost of buying is $17,554, and buying is cheaper by $179,541. Enter instead a $300,000 home with the full $300,000 as the down payment and there is no loan at all: the rate and term play no part in the arithmetic — payments are zero — though both must still be valid entries and the stay must still fit within the term; buying's cost is ownership costs and selling costs set against appreciation. Over 5 years with 2% ownership costs, 3% appreciation and 6% selling costs, against rent of $1,800 growing 3% a year, the net cost of buying is $4,940 after $326,915 of sale proceeds, and buying is cheaper by $109,738.

Ownership costs are a single annual percentage of the home's current value, meant to hold property tax, insurance and maintenance together, and they must not include the mortgage payment, which the model counts separately. Because the value appreciates, the dollar amount of this line rises a little each year. In the headline example 2% gives a net cost of buying of $130,701; the same home at 1% nets $103,882, and at 3% it nets $157,519, with the renting total fixed at $183,899 throughout.

Selling costs are applied once, at the sale, as a percentage of the appreciated price. Run the headline example with selling costs at 0% instead of 6% and the net sale proceeds rise from $149,416 to $175,243 — the $25,827 difference is exactly the selling-cost line — and buying is cheaper by $79,026.

Purchase closing costs are the one input the form leaves at zero until you fill it. You can enter them as a percent of the price or as a dollar amount, but not both, and either way they are cash at purchase, never added to the loan. They matter most on short stays. Hold the headline example to 3 years with no purchase closing costs and buying is cheaper by $4,154; enter 2% of the price ($7,000) and renting is cheaper by $2,846. The dollar field works the same way: rent of $1,800 growing 3% a year against a $300,000 home with $30,000 down at 6.5% over 30 years, 2.5% ownership costs, 2% appreciation, 6% selling costs, an 8-year stay and $9,000 of closing costs entered in dollars is echoed back as $9,000 at purchase, and buying is cheaper by $15,905. A larger percentage on a smaller down payment: rent of $2,400 growing 4% against a $420,000 home with $21,000 down at 6% over 30 years, 1.5% ownership costs, 2% appreciation, 5% selling costs, a 12-year stay and closing costs of 3% of the price ($12,600) — buying is cheaper by $160,671.

The horizon is the hinge

Years to stay can move the verdict on its own, because the one-time costs — purchase closing costs going in, selling costs coming out — are spread across however many years you enter, while the equity that offsets them accumulates slowly at first. The table below re-runs the headline example at every horizon from one to ten years with nothing else changed. At a one-year stay renting is cheaper by $13,640; at two years renting is cheaper by $5,268; the first horizon at which buying is cheaper is a stay of 3 years, and the gap widens each year after that.

Pushing the horizon out to the full mortgage term shows the other end of the mechanism. Change the headline example to a 15-year mortgage and a 15-year stay, keeping every other input, and the loan is fully repaid by the sale: the net sale proceeds of $512,571 are the appreciated price less the 6% selling cost and nothing else, the renter pays $446,374, and buying is cheaper by $305,743. If your honest horizon is short or uncertain, the one-time costs dominate the result; if it is long, the sale proceeds do. Either way, enter the stay you actually expect rather than the one that produces the answer you prefer.

Stress-test the appreciation

Appreciation enters the model twice: it raises the sale price that the proceeds are computed from, and it raises the home value that ownership costs are charged on. Re-run the headline example at 0% appreciation with every other input held, and the net sale proceeds fall from $149,416 to $73,787, the net cost of buying rises to $201,692, and renting is cheaper by $17,793. At 1% appreciation the proceeds are $97,520 and buying is cheaper by $4,445. A result that reverses at a lower appreciation entry rests on that one entry, so re-run the comparison at a lower figure than the one you hope for before weighing anything else. The same test applies to rent growth, which is the renting side's equivalent assumption: a high rent-growth entry favors buying as surely as a high appreciation entry does.

How to read the output

The result shows which option is cheaper and by how much over the years you entered, the net cost of renting, and the net cost of buying; when you enter purchase closing costs it also echoes the dollar amount it counted at purchase. Net sale proceeds are not printed on the card — the worked examples and table on this page show them. "Cheaper" means lower net cost over the horizon you entered, with the equity recovered at sale already credited. It is not a monthly cash-flow comparison: the buyer's monthly outlay — the payment plus a twelfth of the year's ownership costs — can be higher than the rent in every single month while buying is still cheaper on the horizon, because the sale proceeds arrive only at the end. In the headline example the buyer lays out $280,116 in cash across the stay against the renter's $183,899; only the $149,416 returned at the sale makes buying the lower net cost. When the two totals land within a dollar of each other, the engine reports a break-even rather than picking a side. The result is a screen, not a verdict: it prices the money and says nothing about whether you want to own.

Where the model stops

These are the simplifications to hold in mind when reading a result; none has a figure attached, because the model does not estimate what it leaves out. Income taxes are not modeled, and neither is any tax treatment of mortgage interest. Private mortgage insurance and financing points are not modeled. The opportunity cost of the down payment — what that cash might have earned had you not tied it up in the home — is excluded, so a cost of buying that would otherwise exist is simply absent. Appreciation and rent growth are single steady annual rates applied at each anniversary, so market cycles, a flat stretch followed by a jump, or a decline are not represented. The renting side counts rent and nothing else; the buying side counts only the items listed above, with ownership costs collapsed into one percentage. The model always ends with a sale: if you would keep the home past the horizon, the equity is still credited as though sold, net of the selling costs you entered. Finally, this is a comparison of two paths, not an affordability or qualification check — it does not ask whether a lender would make the loan or whether the payment fits a budget.

Common misreadings

• Reading "cheaper" as "better." The model prices the financial side only. A result that favors one option by $53,198 says nothing about mobility, stability or the other reasons people rent or own.
• Putting the mortgage payment inside the ownership-cost percentage. Payments are simulated separately from the amortization. Including them again in the percentage double-counts them and inflates the cost of buying.
• Entering purchase closing costs in both fields. The engine refuses rather than guessing which you meant: "Enter purchase closing costs as either a percent of the price or a dollar amount — not both."
• Staying longer than the mortgage term. The simulation cannot run past the loan it is amortizing; enter a stay of 31 years on a 30-year mortgage and the engine answers "Years to stay cannot exceed the mortgage term."
• Reading the net cost of buying as cash out of pocket. It is net of the sale proceeds. In the headline example the cash that actually leaves the buyer over the stay is $280,116; the reported $130,701 is what remains after $149,416 comes back at the sale.
• Treating the down payment as spent. It is counted as cash out and returns through the equity; what erodes it is selling costs and weak appreciation, not the act of paying it.
• Leaving the horizon at a number you do not believe. Every one-time cost is spread over the years you enter, so the horizon can move the verdict on its own — the table above shows it flipping at a stay of 3 years with nothing else changed. Enter the stay you expect, then try a shorter one to see how much of the result depends on it.

Frequently asked questions

Not financial advice: a general educational comparison that excludes income taxes, mortgage-interest deductions, PMI, and the invested-elsewhere value of your down payment. Purchase closing costs are modeled only when you enter them — the calculator does not assume a default, so enter your expected purchase closing costs for a both-ends comparison. Actual costs vary by market. Values are processed locally in your browser and never transmitted. See the methodology page.