Rent or Buy?
Compare the true cost of renting vs. buying over time. This calculator accounts for appreciation, opportunity cost, taxes, maintenance, and closing costs.
Buy: You put 20% down ($80,000) plus 3% closing costs ($12,000). Monthly costs include your $2,076 mortgage, property tax, insurance, and maintenance. Your home appreciates at 3%/yr. Wealth = home value minus remaining mortgage minus 6% selling costs.
Rent: You pay $2,000/month (increasing 3%/yr) and invest the down payment, closing costs, and any monthly savings at 8%/yr. Wealth = total investment balance.
The renter invests the difference whenever buying costs more per month. This captures the true opportunity cost of tying up capital in a home.
Should I Rent or Buy a Home?
"Renting is throwing money away" is one of the most common — and most misleading — pieces of financial advice. The truth is more nuanced: buying a home is a leveraged investment with significant carrying costs, and renting gives you flexibility plus the ability to invest your capital elsewhere. Which option builds more wealth depends on your specific numbers.
This calculator models the complete financial picture of both decisions over time. It accounts for every major cost on both sides — not just the monthly payment — and shows you where the crossover point is.
How This Calculator Works
The Buy scenario includes your down payment, closing costs (typically 2-5% of the home price), monthly mortgage payment, property taxes, homeowner's insurance, and maintenance (typically 1% of home value per year). The home appreciates over time, and when you "sell" at the end of your time horizon, we subtract 6% for real estate agent commissions. Your wealth is the net equity: home value minus remaining mortgage minus selling costs.
The Rent scenario assumes you invest the money you would have spent on a down payment and closing costs into the stock market. Each month, if buying would cost more than renting, the renter invests that difference too. Your rent increases annually at a rate you specify. Your wealth is your total investment balance.
This approach captures the true opportunity cost of buying — the money locked up in your down payment and higher monthly costs could have been growing in the market instead.
Key Factors That Determine the Answer
Time horizon is everything. Buying almost never makes sense for less than 3-5 years because of closing costs and selling fees. The longer you stay, the more buying tends to win — appreciation compounds and your fixed mortgage payment becomes cheaper relative to rising rents.
The price-to-rent ratio matters. If a home costs $400,000 and comparable rent is $2,000/month, the price-to-rent ratio is 200x (or about 17 years of rent). Ratios above 20 generally favor renting; below 15 generally favor buying. Between 15-20 is the gray zone where other factors tip the scale.
Home appreciation vs. investment returns. If homes in your market appreciate at 4-5% annually and the stock market returns 8-10%, the renter's investments may outpace the buyer's equity — especially in the early years when most of your mortgage payment goes to interest. But remember: the buyer has leverage. A 20% down payment gives you 5x leverage on appreciation.
Local costs swing the math. Property taxes vary dramatically — from 0.3% in Hawaii to over 2.5% in New Jersey and Illinois. High property taxes increase the carrying cost of ownership and push the breakeven point further out.
What This Calculator Doesn't Include
No calculator can capture everything. This one doesn't account for the mortgage interest tax deduction (which benefits some buyers), capital gains exclusion on primary residences (up to $250K single / $500K married), the psychological value of stability and ownership, or the flexibility value of renting. It also assumes constant appreciation and investment returns, which won't happen in practice.
Frequently Asked Questions
Is it better to rent or buy in 2026?
It depends entirely on your local market, how long you plan to stay, and your financial situation. In expensive coastal cities with high price-to-rent ratios, renting and investing often wins. In more affordable markets with strong appreciation, buying tends to come out ahead — especially over 7+ years.
How long do I need to stay for buying to make sense?
The typical breakeven is 3-7 years, but it varies widely. Use the calculator above and adjust the time horizon slider to find exactly when buying catches up in your scenario. If the breakeven is longer than you plan to stay, renting is likely the better financial move.
Does this account for the leverage benefit of buying?
Yes. When you put 20% down and the home appreciates 3%, you earn that 3% on the full home value — not just your down payment. This leveraged return is one of the biggest advantages of buying and is fully reflected in the calculator.
What about building equity vs. "throwing money away" on rent?
This framing is misleading. Homeowners also "throw away" money on interest, property taxes, insurance, maintenance, and transaction costs. The real question is whether the equity you build plus appreciation outpaces what you'd accumulate by investing the difference — which is exactly what this calculator answers.