Rent vs Buy Calculator

The Hidden Costs of Buying

The sticker price of a home understates the true cost of ownership significantly. Closing costs run 2–5% of the purchase price — on a $400,000 home, that's $8,000–$20,000 paid upfront, none of which builds equity. Annual maintenance averages 1–2% of home value ($4,000–$8,000 on a $400,000 home), though it clusters unevenly: roof replacements, HVAC systems, and appliances arrive in expensive bursts. Property taxes add another 0.5–2.5% depending on location. These recurring costs don't exist for renters — making the true comparison more complex than mortgage payment vs rent.

The Opportunity Cost of the Down Payment

A 20% down payment on a $400,000 home is $80,000. That capital invested in a diversified index fund averaging 7% annually would grow to roughly $305,000 over 20 years. This doesn't make renting automatically better — the home may also appreciate — but it means your down payment is working for you either way, and the relevant question is whether home appreciation plus mortgage equity outpaces what that capital would earn invested elsewhere. In high-price-to-income cities where homes appreciate slowly, the invested capital often wins. In fast-appreciating markets, it often doesn't.

The Price-to-Rent Ratio

Divide the home price by the annual rent for a comparable property. A ratio below 15 generally favours buying; above 20, renting is typically more cost-effective; between 15–20, it depends heavily on personal factors and local market conditions. San Francisco and New York regularly exceed ratios of 30–40, making renting strongly advantageous on pure financial grounds. Markets in the Midwest and South often fall below 15, where buying builds wealth faster. This is the single quickest way to assess your local market before running detailed numbers.

When Renting Wins

Renting beats buying in three clear scenarios: you plan to move within 3–5 years (closing costs and transaction costs haven't been recouped), your local price-to-rent ratio is above 20, or you're in a market where prices are flat or declining. The break-even year — the point at which buying becomes cheaper than renting cumulatively — is typically 4–7 years in neutral markets and can exceed 10 years in expensive coastal cities. The calculator's break-even output is the most important number: if you're unlikely to stay past it, rent.

Non-Financial Factors

Financial analysis alone doesn't capture everything. Homeownership provides stability, freedom to renovate, and predictable housing costs (with a fixed mortgage) against rising rents. Renting offers flexibility, no maintenance burden, and easier relocation. For families with children in good school districts, the stability of ownership has genuine non-monetary value. Run the numbers first, but don't let a borderline financial case override a strong personal case for either direction.