How to use this calculator
- Enter the home price, down payment and rate for a home you might buy.
- Enter your monthly rent and how fast you expect it to rise.
- Enter how many years you plan to stay. This is the biggest factor.
- Optionally adjust the assumptions like home value growth and investment returns.
How the comparison works
The calculator follows two people with the same money. One buys the home. The other keeps renting and invests the cash the buyer spent on the down payment and closing costs.
Each month, whoever has the lower housing cost invests the difference. Owning costs include the mortgage, property tax, insurance, upkeep, HOA and PMI. At the end, it compares what each person would have:
- Buyer: the home’s value, minus the remaining loan and the cost of selling, plus any money they invested.
- Renter: the value of their investments.
Why the number of years matters so much
Buying has large one-time costs: closing costs when you buy and selling costs when you leave. Early in a mortgage, most of each payment is interest, so you build little equity at first. Stay only a couple of years and those costs usually make renting cheaper. Stay longer and rising home value and paid-down principal tend to tip things toward buying.
What this doesn’t include
Income taxes are not modeled, such as the mortgage interest deduction or the tax on investment gains. Home prices and investment returns also vary a lot year to year. Try a few different growth rates to see how sensitive the answer is.
Frequently asked questions
Is it always better to buy than rent?
No. Renting often wins if you will move within a few years, if homes are expensive compared to rents where you live, or if you would invest the money you save. Buying tends to win the longer you stay.
What is a good home value growth rate to use?
Over long periods, US home prices have risen roughly in line with or a bit above inflation, but local markets differ widely. 3% a year is a common middle estimate. Try a lower number to be cautious.
Why does the calculator assume renters invest their savings?
To compare fairly. The buyer’s money goes into the house; the renter’s money has to go somewhere too. If you would spend the difference instead of investing it, buying looks better than this result.