Is it better to rent or buy a home?
Buying costs a lot at the start — the down payment and closing costs — and when you sell you pay commissions, but the home grows in value and part of every payment builds equity. Renting is cheap to start and flexible, but the rent usually rises every year and you build no equity. The longer you stay, the more likely buying comes out ahead.
This rent vs. buy calculator compares the two the fair way. For each length of stay from 1 to 30 years it adds up every cost of buying and of renting, counts what your down payment and deposit could have earned if invested, subtracts what you get when you sell, and turns the result into an average cost per year and per month.
How the comparison works
- Cost of buying = down payment + closing costs + mortgage payments + property tax, insurance, HOA fees and maintenance − tax savings;
- Cost of renting = rent + renter's insurance + upfront cost;
- every dollar spent grows at your after-tax investment return, because that is what it could have earned instead;
- for buying, the money from the sale — the price after selling costs, minus the loan balance and any capital gains tax — is subtracted;
- each total is divided by the years of staying to give the average cost per year.
The year where the two averages cross is the break-even point: stay longer, and buying is cheaper.
Example
A married couple compares a $500,000 home with 20% down at 7.18% for 30 years with renting for $3,000 a month. Over five years renting is cheaper: about $3,559 a month against $4,054 for buying. Buying wins if they stay about 9.3 years or longer, and over 30 years it averages about $6,468 a month against $8,164 for renting.
What changes the answer
The same example with one input changed at a time — how long you need to stay before buying is cheaper:
| Change | Buying cheaper after |
|---|---|
| No change | 9.3 years |
| Rent $2,500 instead of $3,000 | 24.7 years |
| Rent $3,500 instead of $3,000 | 4.6 years |
| Home value grows 1% a year | 26.5 years |
| Home value grows 5% a year | 3.6 years |
| Mortgage rate 6.18% | 6.5 years |
| Mortgage rate 8.18% | 13.4 years |
| Investment return 3% | 7.1 years |
| Investment return 7% | 14.3 years |
- Higher rent and faster home price growth favor buying.
- Higher mortgage rates and a higher investment return on the cash you keep favor renting.
Price-to-rent ratio: a quick check
Divide the home price by a year of rent for a similar home. In the example, $500,000 / ($3,000 × 12) ≈ 13.9. As a rough guide, a ratio under 15 leans toward buying and one over 20 toward renting; in between, run the full numbers above.
What is included
- Buying: mortgage payments, property tax, insurance, HOA fees and maintenance, the tax saved by deducting mortgage interest and property tax above the standard deduction, and the sale of the home after selling costs, the loan payoff and capital gains tax above the exclusion.
- Renting: rent, renter's insurance, the upfront cost and the return the security deposit could have earned.
- Investment return: money spent in each year is compared at the after-tax return you could have earned on it.
- Taxes: the 2026 standard deduction for your filing status, the $250,000 home-sale exclusion ($500,000 for married couples filing jointly) and a 15% capital gains rate.
Beyond the numbers
- Buying gives stability, freedom to renovate and forced saving through equity, but ties up cash and makes moving slow and costly.
- Renting keeps you flexible and leaves repairs to the landlord, but the rent and the lease can change.
Ready to look at buying? The house affordability calculator shows the price your income supports, the down payment calculator the cash you need, and the mortgage calculator the monthly payment with taxes and insurance. Staying a renter? The rent calculator shows how much rent fits your income.