Rent vs Buy Calculator

How the Rent vs Buy Simulation Works

The calculator runs a year-by-year simulation across your chosen time horizon. At every step it tracks two parallel paths:

The Buyer Path starts with the purchase: down payment, closing costs, and the first mortgage payment. Each year, the model applies:

• Principal and interest (fixed-rate amortization)
• Property tax (applied to the current appreciated value)
• Home insurance (fixed annual cost you enter)
• Maintenance and repairs (% of current value — the "1% rule" baseline)
• HOA fees (if applicable)

At any given year, Buyer Net Worth = Home Value − Remaining Loan Balance − Selling Closing Costs. Selling costs are deducted because realising the equity requires a transaction.

The Renter Path invests the buyer's upfront cash (down payment + buying closing costs) from day one. Each year, the portfolio earns the investment return rate you specify, and the annual cost difference is added to (or withdrawn from) the portfolio:

Renter's annual surplus = Annual Buying Cost − Annual Renting Cost

If buying costs more than renting, the renter invests the savings. If renting is more expensive, the renter draws from the portfolio. Renter Net Worth = Investment Portfolio value at each year.

Break-even year is the first year where Buyer Net Worth ≥ Renter Net Worth. Before that year, renting builds more wealth. After it, buying does.

How to Use the Calculator

1. Set your Currency — choose any of the 17 supported currencies at the top.
2. Try a Scenario Preset — select Conservative, Moderate, or Aggressive to seed the key assumptions, then fine-tune manually.
3. Buying Tab — enter the home price, down payment, interest rate, loan term, property tax, insurance, maintenance rate, and closing costs.
4. Renting Tab — enter your current monthly rent, expected annual rent increase, and renters insurance cost.
5. Assumptions Tab — set the home appreciation rate, investment return rate, and time horizon.
6. Read the Verdict — the right panel shows which path wins at your time horizon and by how much, plus the break-even year.
7. Explore the Chart — the SVG net worth chart plots both paths year by year. The amber dashed line marks the break-even year.
8. Expand the Table — the year-by-year breakdown lets you inspect every data point.
9. Click "Explain with AI" — get a personalised 200-word analysis of your specific scenario with actionable next steps.

The True Cost of Buying

Most buyers only focus on the mortgage payment and the potential appreciation. The real cost of ownership includes several items that erode the apparent advantage of building equity:

The calculator includes all of these. Many online tools omit selling costs — which is a significant distortion, since you cannot realise equity without a transaction.

The True Cost of Renting

Renting is not "throwing money away." The renter's costs are:

• Monthly rent (increasing annually at the rent inflation rate)
• Renters insurance (typically $150–$300 per year)

Crucially, the renter retains the opportunity to invest the down payment and the monthly savings — and this invested portfolio is the renter's parallel wealth-building engine.

Key Variables and Their Impact

Home Appreciation Rate — The single biggest swing factor for the buyer. Historically, US home prices have appreciated at ~3–4% per year nationally, but markets vary enormously. At 5%+ appreciation, buying almost always wins quickly. At 1–2%, renting is often ahead for the first 10–15 years.

Investment Return Rate — The renter's equivalent of home appreciation. A diversified stock market portfolio has historically returned 7–10% annually (before inflation). A higher investment return extends the period where renting wins.

Time Horizon — Buying almost always wins eventually, but the break-even year can be anywhere from year 3 to year 25+ depending on the market. If you plan to move in 3–5 years, renting is almost always mathematically superior due to the dead-weight of closing costs.

Rent Inflation — Rising rents erode the renter's cost advantage over time. In high-inflation rental markets, the buyer's fixed mortgage payment becomes increasingly competitive.

Down Payment Size — A larger down payment gives the buyer a lower monthly mortgage but reduces the renter's initial investment pool. The calculator handles this tradeoff automatically.

When Does Buying Win?

Buying tends to beat renting when:

• You stay for a long time — 7+ years allows closing costs to amortise and appreciation to compound.
• Appreciation outpaces investment returns — historically rare but common in supply-constrained cities.
• Rent is rising fast — each year of rent inflation makes the renter's annual cost higher.
• Mortgage rates are low — lower rates reduce the interest burden, making the monthly cost competitive with rent earlier.
• You have a large down payment — more equity from day one and a lower loan balance.

When Does Renting Win?

Renting tends to beat buying when:

• Your time horizon is short — below 5–7 years in most markets, closing costs alone make buying a net loss.
• Investment returns exceed appreciation — a 9% stock market return vs a 3% appreciation rate gives the renter a compounding advantage.
• The price-to-rent ratio is high — dividing the home price by annual rent gives a ratio; above 25× is typically renter-friendly territory.
• You carry other debt — liquidity from not tying up cash in a down payment may have higher utility.

Benefits of Using This Calculator

• Full cost model — includes appreciation, amortization, tax, insurance, maintenance, HOA, and both buying and selling closing costs.
• Opportunity cost engine — the renter's portfolio grows in parallel at your chosen investment rate, making the comparison genuinely apples-to-apples.
• Break-even year — immediately shows the year the decision flips, so you can match it to your expected holding period.
• Scenario presets — one-click Conservative / Moderate / Aggressive settings let you stress-test the assumptions in seconds.
• SVG net worth chart — visualise both wealth trajectories and the exact crossing point.
• 17 currencies — supports USD, GBP, EUR, AED, INR, CAD, AUD, SGD, SAR, and more.
• AI narrative — "Explain with AI" delivers a personalised 200-word insight on your specific numbers.
• PDF report — download a formal summary to share with a partner, advisor, or bank.
• Free, no registration — unlimited scenarios at zero cost.

Common Mistakes in Rent vs Buy Analysis

1. Ignoring selling costs — agent commissions and transfer taxes typically cost 5–8% of the home value. Omitting them makes buying look far better than it is for short holding periods.
2. Using a fixed rent — rent does not stay constant. A 3% annual rent increase compounds significantly: rent rises 34% over 10 years. Using current rent for a decade-long projection understates the renter's future costs.
3. Forgetting opportunity cost — the down payment is capital. Comparing the mortgage-only path against rent-only path ignores that the down payment, if not tied up in a house, could be working in the market.
4. Using list price, not appraised value — closing costs and your LTP ratio are calculated on appraised value, which may differ from the price you pay.
5. Anchoring on the monthly payment — "the mortgage is the same as my rent" is rarely true once taxes, insurance, and maintenance are added. The fully-loaded buying cost is typically 30–50% more than the principal-and-interest payment alone.
6. Short time horizon with a long loan — a 30-year loan on a home you plan to sell in 4 years means you have barely made a dent in the principal. Most of your early payments go to interest.