Rent vs. buy calculator

Rent vs. Buy Calculator

Why “rent is throwing money away” is bad math

You’ll see this line everywhere, and it’s simplistic to the point of being misleading. Rent isn’t thrown away any more than a mortgage payment’s interest, property tax, insurance, and maintenance costs are — a huge chunk of what you pay as a homeowner doesn’t build equity either. The real question isn’t “does renting build equity” (it doesn’t, and nobody claims it does). It’s “which path leaves you with more money at the end, accounting for everything.” That requires actually running the numbers, not repeating a slogan.

This calculator does that by tracking two separate paths in parallel over however many years you tell it you plan to stay. On the buying side: your mortgage balance shrinking through amortization, your home’s value appreciating, and the costs of taxes, insurance, and maintenance along the way. On the renting side: what your down payment would be worth if you invested it instead, plus whatever you’d save each month by renting instead of owning — assuming that gets invested too.

Why the “years you plan to stay” field matters more than almost anything else here

Buying involves big upfront costs — closing costs, and years of mortgage payments that go mostly toward interest early on rather than principal. Those costs get spread out over however long you own the home. Stay one year and sell, and those upfront costs alone can wipe out any equity gain from appreciation. Stay fifteen years, and the math tilts hard toward buying, since you’ve had time to actually build meaningful equity and the fixed costs are spread thin.

This is why generic “is renting or buying better” content online is close to useless — the honest answer is almost always “it depends how long you’re staying,” and that’s exactly the variable this calculator asks you to set.

The part almost nobody accounts for

If you rent instead of buying, you’re not spending your down payment. That money doesn’t just sit there — if you invest it, it grows. Over 7, 10, 15 years, a down payment that would’ve gone into a house can compound into a genuinely large sum in a normal investment account. Most casual “rent vs buy” comparisons completely ignore this, which quietly stacks the deck in favor of buying, since buying’s advantages get counted while renting’s biggest financial advantage gets left out.

This calculator explicitly includes it, which is part of why the results can come out closer than people expect, or even favor renting in scenarios where “conventional wisdom” says buy.

What this honestly doesn’t capture

The mortgage interest deduction can meaningfully favor buying for some households, especially with a large loan and higher tax bracket, but it depends on your specific tax situation and whether you itemize — too variable to build into a general calculator without giving people a false sense of precision. And plenty of real reasons to buy or rent have nothing to do with the math at all: wanting stability for kids in a school district, wanting the freedom to relocate for a job, simply wanting to own your space. This tool answers the financial question. It doesn’t answer the whole question.

Should I use my actual local property tax rate instead of the default? Yes, definitely — property tax rates vary enormously by location (some states run under 0.5%, others well over 2%), and this input meaningfully changes the result. A quick search for “[your county] property tax rate” gets you the real number.

Why does the calculator assume selling costs at the end? Because home equity isn’t fully liquid — turning it into cash (through a sale) typically costs somewhere around 6-8% in agent commissions and closing costs. Leaving that out would overstate what buying is actually worth if you ever needed to access that money.