Rent vs Buy Calculator
Which is cheaper over time? The answer may surprise you.
Why "Renting Is Throwing Money Away" Is Wrong
The most repeated financial myth in America is that renting is wasting money while buying builds wealth. The truth is that both renting and buying cost money — the question is which costs less after accounting for all the hidden costs that the "rent is throwing money away" crowd conveniently ignores.
When you buy a home, your mortgage payment is not entirely building equity. In the early years of a 30-year mortgage, roughly 70-80% of each payment goes to interest — which is just as "thrown away" as rent. On a $280,000 mortgage at 6.5%, your first year's interest alone is about $18,000. Add property taxes ($4,200 on a $350K home at 1.2%), homeowners insurance ($1,800), maintenance ($3,500), and the opportunity cost of having $70,000 locked in a down payment instead of invested, and the annual cost of owning often exceeds what renters pay for the same square footage.
The Variables That Actually Decide
Three factors determine whether buying or renting wins in your specific situation. How long you plan to stay is the most important — buying has high fixed costs (closing costs, agent commissions at sale) that only make sense if spread over 5+ years. The rent-to-price ratio in your market matters enormously: if monthly rent is less than 0.5% of the purchase price, renting is almost always cheaper; above 0.8%, buying usually wins. And the spread between mortgage rates and investment returns drives the opportunity cost calculation — when rates are high and returns are higher, the money locked in home equity could be earning more in the market.
This calculator models all of these factors simultaneously, which is what makes it more useful than the napkin math most people use. The napkin version compares mortgage payment to rent and declares a winner. The real analysis includes property taxes, insurance, maintenance, closing costs, opportunity cost of the down payment, rent increases, home appreciation, tax benefits of mortgage interest, and the reinvestment of the renter's savings — a much more complete picture that often flips the naive conclusion.
The Breakeven Timeline
For most markets in 2026, the breakeven point where buying becomes cheaper than renting is 5-7 years. Below 5 years, closing costs and the front-loaded interest structure of a new mortgage make buying more expensive in nearly every scenario. Above 7 years, the combination of building equity, fixed mortgage payments (while rent increases), and home appreciation typically tips the scales toward buying. The exact breakeven depends heavily on your local market — in San Francisco it might be 10+ years, in Memphis it might be 3.
What costs does this calculator include for buying?
Mortgage principal and interest, property taxes, homeowners insurance, maintenance, closing costs (estimated at 3% of purchase price), and the opportunity cost of the down payment (what it would have earned if invested). It credits the homeowner with equity built and home appreciation.
What about the tax benefit of mortgage interest?
The mortgage interest deduction only benefits you if you itemize deductions and your total itemized deductions exceed the standard deduction ($30,000 for married filing jointly in 2026). Since the standard deduction increased significantly in 2018, fewer than 10% of homeowners actually benefit from the mortgage interest deduction. This calculator does not include it because for most people, it does not apply.
Should I buy if buying is slightly more expensive?
Possibly. The non-financial benefits of homeownership — stability, customization, community roots, no landlord — have real value that a calculator cannot quantify. If buying costs 5-10% more over your timeline but you value the stability, that premium may be worth paying. If buying costs 30%+ more, the financial case for renting is strong enough to outweigh most lifestyle preferences.