Rent vs Buy Calculator

The Opportunity Cost Most Comparisons Skip

"Renting throws money away, buying builds equity" skips the biggest number in the whole decision: what the down payment and closing costs could have earned if invested instead of locked into a house. A renter who invests that same cash (plus whatever the buy path costs extra each month in taxes, insurance, and maintenance) is running a real competing investment, not doing nothing with their money.

Whether buying or renting-and-investing wins depends on four things pulling against each other: how fast the home appreciates, how much the mortgage and ownership costs exceed rent each month, how well the invested alternative performs, and how long the comparison runs. This calculator runs all four together, month by month, rather than comparing a single mortgage payment to a single rent check.

Why the Standard Deduction Changes the Math

For 2026, the IRS standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly. That threshold is high enough that most filers no longer itemize. This means the mortgage interest deduction (a mainstay of older rent-vs-buy arguments) delivers zero marginal benefit unless itemized deductions (mortgage interest plus everything else) already clear that bar. This calculator ignores the deduction by default for that reason; if you know you itemize, treat the buy-side monthly cost shown here as slightly overstated.

A Worked Example

Using this calculator's defaults: a $350,000 home, 20% down ($70,000), a 6.5% 30-year mortgage, and 3% closing costs ($10,500), for $80,500 in upfront cash either way. The mortgage payment is about $1,770/month. Adding a 1.1% property tax, 1.5% maintenance budget, and $1,800/year insurance brings the first month's total buying cost to roughly $2,681. Renting a comparable home at $2,000/month plus $200/year renter's insurance costs about $2,017 the first month, a $661/month gap that a renter can invest.

Investing the $80,500 upfront plus that monthly gap at a 7% return (while the home appreciates at 4%/year), buying's net worth (home equity, net of an assumed 8% cost to sell) overtakes renting's invested net worth around year 16. By year 20, buying shows roughly $549,700 in net worth against roughly $536,500 for renting-and-investing, a close race but buying has pulled ahead. Change the rent, the rate, or the investment return by even a percentage point and this can flip either direction, which is the entire point of running your own numbers rather than trusting a rule of thumb.

A Quick Sanity Check: Price-to-Rent Ratio

Dividing home price by annual rent gives a rough first filter. Below about 15, buying tends to look favorable; above about 20, renting tends to look favorable; in between is a genuine toss-up that depends on the other inputs. The default numbers above ($350,000 ÷ $24,000/year rent ≈ 14.6) sit just under that lower band, consistent with buying eventually winning in the full simulation.

What This Doesn't Cover

This model assumes a fixed-rate mortgage with no refinancing, constant tax and insurance rates, and that every dollar the buy path costs more than renting actually gets invested rather than spent. A real renter who doesn't invest the difference won't see the net-worth path shown here. It ignores PMI (relevant below 20% down), the mortgage interest deduction (explained above), moving costs beyond the modeled closing/selling costs, and the non-financial value of stability or freedom to relocate. It is a planning estimate, not a substitute for a lender's or fee-only financial advisor's review of your specific numbers.