Rent vs Buy Calculator

Buying’s net worth = home equity (appreciated value − mortgage balance − selling costs). Renting’s net worth = the down payment and closing costs, plus every monthly cost difference, invested at the return rate. Both spend the same each month; the higher net worth wins, and the break-even is the year the curves cross.

It’s a net-worth race, not a payment comparison

The wrong way to compare renting and buying is mortgage payment versus rent — that ignores almost everything that matters. The right way is to ask which leaves you wealthier after the years you plan to stay. This calculator runs both as a net-worth race on an equal budget: the buyer sinks the down payment and closing costs into the home and pays the monthly ownership costs; the renter invests that same down payment, pays rent, and invests every month that owning would have cost more. At the horizon, the buyer’s wealth is their home equity — the appreciated value minus the remaining mortgage and the costs of selling — and the renter’s wealth is their investment portfolio. The higher number wins.

Framed this way, the result is honest about both sides. Buying builds equity through paydown and appreciation but carries taxes, insurance, maintenance and heavy transaction costs. Renting builds nothing in property but frees a large sum to invest. Which comes out ahead is genuinely uncertain — it depends on assumptions, not ideology.

Worked example — a $500,000 home, 20% down at 6.5%, versus $2,500 rent, over 10 years (3% appreciation, 5% investing): Buying ends with about $293,000 of equity; renting-and-investing with about $319,000. Renting wins by roughly $26,000 — and the break-even is around 15 years, so you’d need to stay longer for buying to pay off.

The break-even, and why your horizon decides it

Because buying front-loads big one-time costs — closing costs to buy, and especially agent fees to sell — owning starts well behind and has to catch up through appreciation and paydown. The break-even is the year it pulls level: stay longer than that and buying wins; sell sooner and renting does. This is why a short stay almost always favours renting, however cheap the mortgage looks — you never recover the transaction drag. The calculator gives the break-even in years and tells you plainly whether your horizon clears it.

The chart is the centrepiece: two net-worth curves, buying and renting, crossing at the break-even. Below the crossing, the renting line is higher; above it, buying pulls ahead. Where your horizon falls relative to that crossing is the whole decision.

The two assumptions that swing everything

Two inputs dominate the result, and they pull in opposite directions: home appreciation and the investment return. Appreciation is the engine of buying’s equity; the investment return is the engine of renting’s portfolio. Raise appreciation and buying wins sooner; raise the investment return and renting can win forever — if your portfolio compounds faster than houses appreciate, owning may never catch up, and the calculator will say there is no break-even. Because these two assumptions move the answer more than anything else, treat the result as conditional, not a verdict: try a range of values and see how robust the conclusion is.

Other factors matter at the margin. The mortgage-interest and property-tax deductions lower the cost of owning if you itemise — enter your tax rate to include them. Rent inflation erodes renting’s edge over long horizons. And maintenance, often forgotten, is a real ongoing cost of owning. The point of the tool is not to declare a winner but to show how the answer depends on what you believe about the future.