Rent vs Buy Calculator
Rent vs Buy Calculator
Buying Assumptions
Renting & Time Horizon
7-Year Verdict
| Yr | Buy Net | Rent Net | Leader |
|---|---|---|---|
| 1 | $54,696 | $17,560 | RENT |
| 2 | $72,988 | $35,389 | RENT |
| 3 | $90,855 | $53,478 | RENT |
| 4 | $108,271 | $71,814 | RENT |
| 5 | $125,213 | $90,385 | RENT |
| 6 | $141,652 | $109,175 | RENT |
| 7 | $157,561 | $128,167 | RENT |
Based on your results — what to do next:
Calculate your full mortgage payment
Your 20% down on $400,000 gives ~$2,086/mo P&I — see the full amortization schedule.
Verify you can afford this home
Before committing to $400,000, check if your income passes the lender's 28/36 qualifying rule.
Model the opportunity cost
Investing $92,000 at 7%/yr instead grows to $147,732 in 7 years.
The rent vs buy decision compares the total net cost of homeownership — mortgage, taxes, insurance, maintenance, and equity — against the total net cost of renting — monthly rent, annual increases, and what your down payment earns if invested instead. This calculator models both paths over your exact time horizon and outputs a break-even year, annual net cost comparison, and a definitive winner based on your inputs.
How the Rent vs Buy Calculator Works
The calculator models two parallel 30-year cash flows and computes the net cost of each path annually. For buyers, total cash spent (mortgage payments + taxes + insurance + maintenance + HOA + closing costs) is reduced by home equity. For renters, total rent paid is reduced by investment gains on the down payment and closing costs invested at your specified return rate.
| Input | Impact |
|---|---|
| Home Appreciation | Higher appreciation increases equity and favors buying. U.S. average: ~3.5%/yr over 30 years. |
| Investment Return | Higher stock returns increase the opportunity cost of your down payment and favor renting. S&P 500 historical average: ~7% real return. |
| Time Horizon | Buying almost always wins at 10+ years. Renting wins in most markets under 5 years due to upfront costs and slow early equity accumulation. |
| Maintenance Rate | The 1%–2% annual rule adds $4,000–$8,000/yr on a $400k home — a hidden cost that significantly shifts the break-even calculation. |
| Selling Costs | Agent commissions and fees (~6% of sale price) are deducted from equity at the horizon. This alone is $24,000 on a $400k sale. |
Example: $400,000 home, 20% down ($80k), 6.8% rate, $2,000/mo rent, 7-year horizon. Buying net cost: ~$180,000 (payments minus equity after 6% selling costs). Renting net cost: ~$195,000 (rent minus $80k invested at 7% = ~$129k, so opportunity gain ~$49k). Buying wins by ~$15,000. Flip to a 3-year horizon and renting wins by $25,000+.
⚠️ Expert Pro-Tip
The "Price-to-Rent Ratio" Is Your Quickest Filter:Divide the home's purchase price by annual rent for a comparable property. Below 15 → strong buy signal. 15–20 → neutral, run the full model. Above 20 → likely renter-friendly market. In 2026, cities like San Francisco (ratio ~30+) and NYC (~25+) favor renting almost unconditionally at typical holding periods. Cities like Detroit, Cleveland, Memphis, and St. Louis (ratio ~8–12) skew heavily toward buying. This ratio alone won't give you the answer — but it'll tell you in 5 seconds whether it's worth running the full analysis.
Frequently Asked Questions: Rent vs Buy in 2026
Should I rent or buy in 2026?
With 30-year mortgage rates near 6.8% and home prices still elevated nationally, renting wins in the short term (under 5 years) in most markets. If you plan to stay 7+ years, buying wins due to equity accumulation, appreciation, and stable payments vs. rising rents. The biggest factor: the price-to-rent ratio in your target market. Use this calculator with your specific numbers.
What is the average break-even year for buying vs. renting?
Nationally, the break-even point averages 5–7 years. In high-cost coastal markets (NYC, LA, SF, Seattle), break-even can stretch to 12–20+ years. In affordable Midwest and Southern markets (Cleveland, Indianapolis, Memphis), break-even is often under 3 years. The key variables are your home appreciation assumption and what you'd earn by investing the down payment instead.
How does the opportunity cost of a down payment work?
When you make a $80,000 down payment, that money is locked in the home rather than invested. If the stock market returns 7%/yr, $80,000 grows to ~$157,000 in 10 years — $77,000 in gains you forgo. This is the "opportunity cost." If your home equity grows faster than this (through appreciation + loan paydown), buying wins. If the market outpaces home value growth, renting wins.
What hidden costs of homeownership does this calculator include?
The calculator includes: property taxes (typically 1%–1.5%/yr), homeowner's insurance, maintenance and repairs (1%–2%/yr of value), HOA fees, mortgage P&I, and closing costs upfront. It deducts equity (home value minus loan balance, net of 6% selling costs) from the total cost at your time horizon. Many buyers forget maintenance, which alone adds $4,000–$10,000/yr to the true cost.
What happens if I sell before the break-even year?
Selling before the break-even year means you've paid more (net of equity) than a renter would have. Closing costs to buy (~3%) and selling costs (~6%) total roughly 9% of the home price — on a $400,000 home, that's $36,000 in transaction costs alone. This is why buying only makes sense with a 5+ year commitment. If you may move in 1–3 years, renting is almost always cheaper.