house REAL ESTATE TOOLS

Rent vs Buy Calculator

Should you sign a lease or a mortgage? Compare the total financial impact over time.

Renting Scenario

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Buying Scenario

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7 Years
How It Works: Compares the total cost of renting versus the net cost of buying over time.

Key Inputs:
  • Renting: Monthly Rent and estimated annual increase.
  • Buying: Home Price, Down Payment, Rate, and holding period.


Note: Net cost of buying accounts for equity gained through appreciation and principal paydown.
Total Cost of Renting
$210,000
Net Cost of Buying
(Expenses - Equity Gained)
$185,400

Verdict: Buying is Cheaper

Over 7 years, you would save $24,600 by buying.

Cost Analysis (Selected Timeframe)

Cumulative Cost Over Time (30 Years)

Is Buying Always Better? The 5% Rule.

The age-old debate of "Rent vs. Buy" is often oversimplified. Real estate agents will tell you that paying rent is "throwing money away," while financial minimalists argue that owning a home is a liability, not an asset. The truth lies in the math, specifically in comparing the Unrecoverable Costs of both options.

The Unrecoverable Costs of Renting

This is simple: Your rent payment. Once you pay it, it's gone. Renters insurance is also unrecoverable, but usually negligible.

The Unrecoverable Costs of Buying

Buying isn't free money. You have significant "throw-away" costs here too:

1. The Cost of Capital

This is your mortgage interest OR the opportunity cost of your down payment (money that could have earned 8% in the S&P 500).

2. Maintenance & Taxes

Property taxes (usually 1-2% of value) and maintenance (1% rule). A $500k home costs $10k/year just to keep standing.

Visualizing the Break-Even Point

As our calculator shows, buying usually wins over long time horizons (7+ years) because rents inflate while fixed-rate mortgages stay flat. However, if you move every 3 years, the Closing Costs (6% to sell!) will wipe out any equity gains, making renting the clear winner.

The "Hidden" Benefit of Mortgages

A mortgage acts as a Forced Savings Account. For many people, paying down principal is the only way they save money consistently. If you are disciplined enough to invest the difference between rent and a mortgage, renting can be lucrative. If not, buying forces you to build wealth.

Disclaimer: This model assumes consistent market returns and property appreciation. Local real estate markets vary wildly.