Rent vs. Buy Calculator — net cost of each path over your horizon

How it works

Renting's side is one growing sum: rent for each year of the stay, rising at the rent-growth assumption. Buying's side is paid-out minus recovered. Paid out: the down payment, the amortizing principal-and-interest payment (M = P·r(1+r)ⁿ ⁄ ((1+r)ⁿ − 1)) for each month until the horizon or the loan's end, and monthly tax, insurance, and maintenance. Recovered at the horizon: the home's value grown at the appreciation assumption (compound growth, value × (1+g)ʸ), minus selling costs and minus the balance still owed on the loan — the same remaining-balance arithmetic a lender's balloon schedule uses. The growth rates and selling percentage are assumptions you control, and the model deliberately excludes some real factors, listed in the accuracy question below.

Worked example

The recovery step is the one a source publishes: on a $100,000 loan at 4% over 30 years, CFPB's balloon example shows that after five years of payments you would still owe $90,448 — the remaining balance that comes off the sale price when you sell. This calculator runs that same arithmetic inside the comparison: for a $400,000 home, 20% down at 6.5%, against $2,000 rent over a 7-year stay with all growth assumptions held at zero, it computes about $168,000 net for renting, about $183,300 net for buying, and a break-even near year 19 — this calculator's own figures for those inputs, not published values, and they swing with every assumption you change.

Frequently asked questions

How can buying cost less even though the monthly payment is higher?

Because part of every mortgage payment buys back equity, and appreciation accrues to the owner. The comparison counts what a sale recovers — appreciated value minus selling costs and the remaining balance — against everything paid out, so a higher monthly outflow can still produce a lower net cost over enough years. Over a short stay the up-front costs dominate and the reverse is common.

What is the break-even year?

The first year in which buying's cumulative net cost falls to or below renting's. Before it, the down payment and early-loan interest keep buying more expensive; after it, equity and appreciation have caught up. If rent is low or the stay assumptions are unfavorable, there may be no break-even within 40 years, and the calculator says so rather than showing a number.

Why does the length of stay matter so much?

Buying front-loads costs (down payment, mostly-interest early payments) and back-loads recovery (equity, appreciation, which compound with time). Renting is almost linear. So the comparison flips with the horizon: a stay of a few years usually favors renting, a long stay usually favors owning, and the crossing point moves with rates, rent, and growth assumptions — which is exactly what the chart shows.

What do the appreciation and rent-growth assumptions do?

Appreciation compounds the home's value to the sale year, raising what buying recovers; rent growth compounds the rent each year, raising what renting pays. Both deliberately default to 0% — a neutral null, not a forecast — because the true values vary by market and period and they dominate the outcome. The honest use is to try a range in both directions and watch how the answer and the break-even year move.

What does "recovered at sale" include?

The home's value at the horizon (price grown at the appreciation assumption), minus selling costs at the percentage you set, minus the loan balance still owed — the same remaining-balance arithmetic as a balloon payoff. It is the cash a sale would return, which is why buying's net cost can be far below the total it paid out.

Does this account for investing the down payment instead?

No — that is the model's biggest exclusion. Money not spent on a down payment could earn investment returns while renting, which would raise buying's relative cost. It also excludes purchase closing costs, tax effects of ownership, and private mortgage insurance, which CFPB says applies to a conventional loan with "a down payment of less than 20 percent." Each of these shifts the comparison toward renting or buying, so treat the result as a structural comparison, not a verdict.

How accurate is this, and what does it exclude?

The amortization, balance, and compound-growth arithmetic are exact for the assumptions given; the answer is only as good as those assumptions. Excluded: investment return on the down payment, purchase closing costs, tax effects, PMI, rate changes, and any gap between assumed and actual appreciation — the factor that dominates real outcomes. Vary the assumptions before trusting a conclusion either way.