Rent vs Buy Calculator
The honest mortgage vs rent comparison. Full amortization engine, PMI auto-removal, opportunity cost of down payment, hidden costs reveal, sensitivity heatmap, and break-even timeline — all in your browser.
| Inv. Return → Appreciation ↓ | 2% inv | 5% inv | 7% inv | 9% inv | 12% inv |
|---|---|---|---|---|---|
| 0% appr | -$22K | -$66K | -$104K | -$149K | -$237K |
| 2% appr | +$61K | +$16K | -$21K | -$67K | -$155K |
| 4% appr | +$159K | +$115K | +$77K | +$31K | -$57K |
| 6% appr | +$276K | +$231K | +$194K | +$148K | +$60K |
| 8% appr | +$414K | +$370K | +$332K | +$286K | +$199K |
Is It Better to Rent or Buy Right Now?
The rent vs buy debate is the most argued question in personal finance — and the answer is not what most people think. The conventional wisdom is "always buy, renting throws money away." The honest math says it depends on four key factors: your local market, your time horizon, what mortgage rate you can get, and what you would do with the down payment money if you didn't buy.
In high-cost cities like New York, San Francisco, and Los Angeles, home prices are so high relative to rents that the opportunity cost of a down payment invested in a diversified portfolio often outpaces home equity growth — especially at current 6–7% mortgage rates. In lower-cost markets in the Midwest and South, buying frequently wins, particularly when you plan to stay for 10+ years.
The key insight that most calculators miss: both paths build wealth. Buying builds equity (and leveraged exposure to real estate appreciation). Renting frees up capital for investment. The question is which path builds more total wealth at your specific time horizon — and the answer changes dramatically depending on your assumptions about home appreciation and investment returns.
The Real Monthly Cost of Buying a Home
Most people only think about the mortgage payment. The true monthly cost of homeownership includes seven components:
| Cost Component | Example (350K home, 6.5%) | Notes |
|---|---|---|
| Principal & Interest | $1,769/mo | 30-yr fixed, 20% down = $280K loan |
| Property Tax | $350/mo | 1.2% of $350K annually |
| Homeowner's Insurance | $150/mo | Typical HO-3 policy |
| HOA (if applicable) | $0–$500/mo | Condos and many neighborhoods |
| Maintenance & Repairs | $292/mo | 1% of home value annually |
| PMI (if < 20% down) | $0–$280/mo | 0.8% on remaining loan balance |
| Minus: Tax Benefit | −$100/mo est. | If itemizing vs standard deduction |
| Total Monthly Cost | ~$2,661/mo | vs. mortgage-only perception of $1,769 |
Estimates for illustration. Your costs will vary by location, insurance provider, and loan terms.
The Opportunity Cost Argument for Renting
The most powerful argument for renting in high-cost markets is the opportunity cost of the down payment. When you buy a $600,000 home with 20% down, you're writing a $120,000 check. That capital is now locked in home equity — illiquid, leveraged to a single asset, and dependent on local real estate appreciation.
The renter who invests that $120,000 in a low-cost index fund at a historical average of 7–10% annually:
- • At 5 years: $120K grows to $168K at 7% — $48K of investment gains
- • At 10 years: $120K grows to $236K at 7% — $116K of investment gains
- • At 15 years: $120K grows to $330K at 7% — $210K of investment gains
The buyer needs the home to appreciate enough to overcome this opportunity cost plus cover higher monthly costs (mortgage, property tax, maintenance) compared to renting an equivalent unit. In HCOL markets, this math often doesn't work until year 12–15+.
When Does Buying Beat Renting?
Buying typically wins when several factors align:
- Long time horizon (10+ years): Closing costs (2–5%) and selling costs (5–7%) are amortized over more years. Redfin pegs current median US homeowner tenure near 12–13 years (up from 6–8 years pre-2008), but if your realistic stay is under 7 years, buying rarely wins on total wealth.
- Lower-cost markets: Where rent-to-price ratios are high (home price is 10–15× annual rent vs. 25–40× in HCOL cities), buying generates positive cash flow or near-parity monthly costs, giving equity all the upside.
- Strong appreciation markets: In markets with 4–6% annual appreciation, leverage amplifies gains dramatically. A 5% appreciation on a $400K home = $20K/year, on a $80K down payment = 25% return on investment.
- Low investment return assumptions: If you'd invest conservatively (bonds, savings accounts at 3–4%), the opportunity cost of the down payment is low, making buying relatively more attractive.
- Tax benefits + high income: High earners who itemize deductions in a 22–35%+ bracket get meaningful tax savings from mortgage interest deductions, particularly in year 1–10 of a 30-year mortgage when most of the payment is interest.
Understanding PMI and How to Remove It
Private Mortgage Insurance (PMI) is required when you put less than 20% down on a conventional loan. It protects the lender (not you) against default risk. PMI typically costs 0.5–1.5% of the original loan amount annually, which on a $300,000 loan is $1,500–$4,500 per year ($125–$375/month).
PMI is automatically canceled when your loan balance reaches 78% of the original home value (Homeowners Protection Act). You can request removal when the balance reaches 80% of the current appraised value — which can happen faster if the home appreciates significantly. Our calculator tracks PMI month by month and automatically removes it when the LTV drops below 80%.
The PMI removal milestone is a meaningful inflection point in the rent vs buy comparison — often saving $150–$300/month, which changes the monthly cost delta significantly.
How to Read the Sensitivity Heatmap
The sensitivity heatmap is the most honest part of any rent vs buy calculator. It shows you that the winner is not determined by a single "right" answer — it's determined by assumptions about two key variables that no one can know in advance:
- Home appreciation rate: The x-axis. Per the Case-Shiller Home Price Index, US nominal home prices appreciated around 5–8% annually during the 2013–2022 stretch — but Shiller\'s long-run data shows real (inflation-adjusted) appreciation was close to zero for most of the 20th century. Run the heatmap at both 2% and 6% before committing to a conclusion.
- Investment return rate: The y-axis. If you'd invest the down payment and monthly savings in stocks (historical: 7–10%), buying faces stiff competition. If you'd park it in a savings account (3–4%), buying looks relatively stronger.
The "toss-up" grey cells in the middle of the heatmap represent the honest answer in many scenarios: both options are roughly equivalent, and your preference for stability vs. flexibility should determine the choice. The extreme cells (deep purple = buying wins big, deep teal = renting wins big) show the scenarios where assumptions matter most.
Frequently Asked Questions
How accurate is this rent vs buy calculator?
Under the hood: full month-by-month amortization — not a simplified annualized estimate. Every month the P&I split recomputes (interest-heavy in years 1–10, principal-heavy later), PMI drops off the moment LTV falls below 80% (per the Homeowners Protection Act), mortgage-interest tax benefit is netted against the standard deduction (not naively stacked on top of it), and the down payment plus monthly rent-vs-buy deltas compound at your chosen investment return. The methodology is patterned after the New York Times rent-vs-buy framework popularized by David Leonhardt — total-wealth comparison over a time horizon, not just "monthly payment vs rent." Accuracy is bounded by your two forecast inputs: appreciation rate and investment return. The sensitivity heatmap exists precisely because no one knows those two numbers in advance — it shows whether your conclusion holds across a 5×5 grid of plausible futures.
What is a reasonable home appreciation rate to assume?
Be skeptical of high assumptions. The Case-Shiller Home Price Index shows US real (inflation-adjusted) home prices grew at roughly 0.4% per year over the century from 1900–2000 — essentially flat. Nominal growth was ~3–4% and closely tracked inflation. The 2000–2006 bubble and the 2020–2022 post-pandemic surge are statistical outliers that drive most of the century's real appreciation. Robert Shiller's research (see "Irrational Exuberance") argues housing is not a good long-run inflation-beating investment. A 3–4% nominal / ~1% real assumption is defensible; 5–8% annual forever is aggressive. Check your conclusion against the heatmap at 2% and 4% appreciation before committing.
Should I include my home as part of my net worth?
Yes, but with nuance. Home equity (market value minus remaining mortgage minus estimated selling costs) counts as a net worth asset. However, your primary residence is an illiquid, non-diversified asset with carrying costs (property tax, maintenance, insurance). It is wealth, but not liquid wealth. Many financial planners separate "primary residence equity" from "investable net worth" for this reason. A common mistake is feeling wealthy because a home appreciated, while forgetting the $400K home also cost $150K in interest, $80K in maintenance, and $50K in property taxes over 20 years.
What if I can't afford the 20% down payment?
With less than 20% down, you'll pay PMI — adding $100–$400/month in costs. This weakens the financial case for buying further. Our calculator models PMI accurately with auto-removal when the LTV drops below 80%. Some programs allow 3–5% down (FHA loans, conventional 3% programs), but FHA mortgage insurance lasts the life of the loan when the initial LTV is above 90%, not just until 80% LTV like conventional PMI. Run 5–10% down scenarios through the simulator to see the actual cost.
Does this calculator account for rent increases?
Yes. The annual rent increase input (default 3%) compounds each year, making renting progressively more expensive. In markets with higher rent inflation — Zillow Research has tracked nationwide asking rents rising 5–10% during 2021–2022 — this materially improves the relative position of buying over long horizons. In rent-stabilized or slow-growth markets, the renter's cost advantage is more durable. Drag the rent increase slider to see how a 1 percentage point change shifts the break-even year.
How do I use the Reverse Calculator to find my personal break-even?
Three modes. "Breakeven Rent" finds the monthly rent at which buying becomes financially superior to renting at your current home price and assumptions. "Breakeven Price" finds the maximum home price at which buying still wins over renting at your current rent. "Breakeven Appreciation" tells you how fast the home needs to appreciate annually to break even by your target year. These three numbers give you concrete anchors for negotiating an offer, evaluating a specific listing, and sanity-checking a landlord's rent hike.
How long is the average American homeowner staying in one home?
Redfin's analysis of US deed records puts the median homeowner tenure at roughly 12–13 years in recent years — up from the 6–8 years typical before 2008, largely because locked-in 3% mortgages from 2020–2022 discouraged selling. That matters here: buying typically underperforms renting unless you clear the break-even year, and break-even usually lands in the 5–12 year range. If you are not confident you will stay 7+ years, the heatmap usually favors renting.
Does renting really throw money away?
No. The slogan ignores that a mortgage is also largely "thrown away" in early years. At 6.8% on a $400,000 loan, roughly 84% of month one's payment is interest — not equity. Add property tax, insurance, maintenance (1–2% of home value per year), and opportunity cost on the down payment, and the buyer's "non-equity" spend often exceeds a comparable rent during years 1–7. The honest comparison is total wealth at a given horizon: buyer equity net of selling costs, versus renter invested portfolio from the down payment plus any monthly cost savings.