Rent vs. Buy Calculator
Buying builds equity but renting avoids six figures in transaction costs. This models both paths — including opportunity cost on your down payment — and finds the breakeven year.
Buying
Renting
Assumptions
Two different questions, two different answers. Net worth counts equity and the invested savings of whoever spends less on housing each month. Cash flow only asks when the monthly check for owning drops below rent.
Net worth over time
The lines cross in year 5 — before that, the renter is richer; after, the buyer.
Where your first month's payment goes
Principal builds your net worth; everything else is gone. The main comparison above also subtracts your mortgage-interest tax benefit from the cost of owning.
Year-by-year comparison
| Year | Buying (net cost) | Renting (net cost) | Buyer net worth | Renter net worth | Cheaper |
|---|---|---|---|---|---|
| 1 | $67,860 | $25,900 | $88,571 | $120,620 | Rent |
| 2 | $85,384 | $52,269 | $107,864 | $131,343 | Rent |
| 3 | $102,555 | $79,100 | $127,913 | $142,159 | Rent |
| 4 | $119,351 | $106,382 | $148,751 | $153,058 | Rent |
| 5 | $135,754 | $134,106 | $170,415 | $164,029 | Rent |
| 6 | $151,739 | $162,258 | $193,395 | $175,511 | Buy |
| 7 | $167,285 | $190,823 | $218,038 | $187,796 | Buy |
| 8 | $182,367 | $219,782 | $244,456 | $200,942 | Buy |
| 9 | $196,957 | $249,115 | $272,772 | $215,008 | Buy |
| 10 | $211,028 | $278,800 | $303,114 | $230,059 | Buy |
How the math works
Both paths are simulated year by year and compared as net cost — cash out the door minus the value you still hold. For buying: P&I, property tax, insurance, and maintenance, minus the tax benefit of deductible mortgage interest (yearly interest × your marginal rate), plus buying closing costs in year 1. That cumulative cost is then reduced by the net equity you'd walk away with selling that year: sale value minus selling costs, minus the remaining loan balance, minus the cash you originally put in (down payment + closing).
For renting: cumulative rent paid, minus the opportunity cost — the investment gains on the down payment and closing costs you kept instead of sinking into a house, grown at your assumed after-tax return. The breakeven year is the first year buying's net cost drops below renting's.
Key assumptions: home value, rent, and investment growth compound at constant rates; mortgage interest is fully deductible at your marginal rate; selling costs are a flat percent. Not modeled: PMI, HOA dues, moving costs, rent control, maintenance spikes, or anything non-financial (stability, freedom to renovate) — which is often the real reason people buy.
Common questions
Why does the renter get to 'invest' the down payment?+
Opportunity cost. A buyer locks tens of thousands into a down payment and closing costs; a renter keeps that cash. Ignoring what the renter could earn on it systematically biases the math toward buying. The investment-return slider lets you set how aggressively that cash would work.
Why is year 1 always terrible for buying?+
Closing costs — typically 2–5% to buy and ~6% to sell — are paid up front but only 'earned back' gradually through principal paydown and appreciation. Sell in year 1 or 2 and those costs dominate everything. This is the mathematical reason behind the 'don't buy if you'll move soon' rule.
Does this account for the mortgage interest tax deduction?+
Yes — each year's mortgage interest is multiplied by your marginal tax rate and subtracted from the buying cost. Note this only helps if you itemize; with today's large standard deduction, many homeowners get no incremental benefit, in which case set the marginal rate slider to 0.
What doesn't this model?+
PMI, HOA dues, moving costs, rent control, lumpy maintenance (a $20k roof in year 7), and variable rates. It also can't value the non-financial side: stability, control over your space, and freedom from landlords are real benefits that never show up in a spreadsheet.