How this rent vs. buy calculator compares the two
Comparing a rent check to a mortgage payment is misleading. Buying has large costs that don't show up in the payment (closing costs, property tax, insurance, maintenance and the cost of selling later) and one big benefit that doesn't show up either: the home can grow in value. Renting ties up no money in a down payment, so that cash can be invested instead.
To compare fairly, the calculator tracks two households that spend exactly the same amount each month:
- The buyer pays the down payment and closing costs up front, then the mortgage plus every ownership cost each month.
- The renter invests the money the buyer spent up front, pays rent each month, and invests any difference whenever renting is cheaper than owning.
- In years when owning becomes cheaper than renting (rents keep rising while a fixed-rate payment doesn't), the buyer invests the difference instead.
At the end, the buyer's net worth is the home's value minus selling costs and the remaining loan, plus any investments. The renter's net worth is their investment portfolio. Whichever is larger is the better financial choice for your inputs, and the break-even year is the first year buying comes out ahead.
Why how long you stay matters so much
Buying and selling a home is expensive: closing costs of 2 to 5% when you buy and around 5 to 6% when you sell, including agent commissions. Early in a mortgage, most of each payment is interest, so equity builds slowly. It usually takes several years of home price growth and principal payments to recover those transaction costs, which is why the common rule of thumb is not to buy unless you expect to stay at least five years. Try changing Years you'll stay to see how the answer shifts for you.
The inputs that move the result most
- Home price growth vs. investment return. The buyer's wealth grows with the home; the renter's grows with their investments. If you expect investments to beat home prices by a wide margin, renting looks better, and vice versa.
- Rent compared to price. A quick check is the price-to-rent ratio: the home price divided by a year's rent for a similar home. The lower the ratio, the more buying tends to make sense; in expensive markets where the ratio is high, renting often wins.
- Mortgage rate. Higher rates mean more of each payment goes to interest rather than equity.
- Rent increases. Your mortgage payment is fixed, but rent usually isn't. Over long periods, steadily rising rent is what tips many comparisons toward buying.
What the calculator leaves out
- Taxes. The mortgage interest deduction only helps if you itemize, and the 2026 standard deduction of $16,100 for single filers ($32,200 for married couples) means most homeowners don't. Taxes on investment gains and the capital gains exclusion when selling a home are also not modeled.
- PMI. With less than 20% down, you'll usually pay private mortgage insurance until you reach 20% equity. Add it to the HOA field as a rough stand-in, or see the mortgage calculator for a detailed payment.
- Non-financial factors. Stability, control over your home, flexibility to move, and not having to handle repairs all matter and don't show up in a net worth comparison.