Rent vs. Buy Calculator

Should you rent or buy a home?

The useful version of that question is not “which monthly payment is smaller?” It is whether renting or buying is likely to leave you in a stronger financial position, and how that answer changes with the number of years you stay. A lower rent payment can still lose to ownership if the home builds equity. A higher ownership payment can still be the better outcome if you would have invested the down payment and the monthly difference instead.

National Mortgage Center’s rent vs. buy calculator models both paths with the same starting cash. It then estimates a break-even point, home equity, sale proceeds, rising rent, and the investment account a renter could build. You can replace every major assumption. Nothing in the result is a promise about future prices or returns.

How our rent vs. buy calculator works

The projection runs month by month for 30 years. At each anniversary it records the estimated position of renting and of buying if you sold that year. The break-even point is the first month when buying’s position is ahead.

1. Enter rent, price, and the mortgage. Add your current monthly rent, a home price, down payment, interest rate, and loan term. Property tax and insurance start as labeled illustrations until you replace them.
2. Set how long you might stay. Move the timeline from 1 to 30 years. The break-even point and the financial position of each path update immediately.
3. Review the advanced assumptions. Open advanced assumptions to change appreciation, rent growth, investment return, maintenance, PMI, closing costs, and selling costs.
4. Compare the positions, not just the payments. Read the estimated break-even, the chart of financial position, and the explanation of appreciation, equity, costs, and the renter’s invested cash.

The cost of renting

Rent starts at the monthly amount you enter. It stays at that level for the first year, then steps up once a year:

Rent in year n = Current rent × (1 + rent growth)^{n − 1}

Renters insurance is added each month and grows with the inflation assumption. A security deposit is set aside and returned at the end without investment growth, so its cost is the return you do not earn on it.

The cost of buying

The loan is the price minus the down payment. The payment is a standard fixed-rate amortizing payment:

Payment = P × [ r(1 + r)ⁿ ] / [ (1 + r)ⁿ − 1 ]

P is the loan amount, r is the monthly interest rate, and n is the number of payments. Each month, interest is the balance times r, and principal is the rest of the payment. A 0% rate splits the loan into equal principal payments. After the term ends, the payment stops and taxes, insurance, maintenance, and HOA continue.

Recurring ownership costs are this year’s property-tax bill, homeowners insurance, maintenance as a percent of the then-current value, HOA dues, and PMI when the down payment is under 20%. PMI is a percent of the original loan and stops once the balance is at or below 80% of the original price. Tax and insurance grow at their own rates. They are not rewritten as a percent of a higher future value.

Home equity and appreciation

Home value compounds annually, with the monthly points filled in so a mid-year sale is not stuck on last year’s price:

Future value = Purchase price × (1 + annual appreciation)^years

Equity is that value minus the remaining mortgage balance. It can be entered as a negative appreciation rate. Equity is not an expense, and it is not cash in hand until you subtract selling costs:

Net sale proceeds = Home value − mortgage balance − selling costs

The opportunity cost of your down payment

The renter does not “lose” the down payment. Both paths start with the same cash: down payment, buyer closing costs, and the security deposit. The buyer turns the down payment into equity and spends the closing costs. The renter invests that down payment and those closing costs. The deposit sits with the renter and comes back at the end; the buyer invests the deposit they did not have to post.

Each month, housing is treated as paid from income. Whichever path spends less cash that month invests the difference at the return you chose, compounded monthly to match the annual rate. Principal paid by the buyer reduces the loan balance, so it shows up again in the sale. The renter, if their rent was lower, gets to invest the cash the buyer used for that principal. That is the tradeoff the chart is drawing.

What is the rent vs. buy break-even point?

Break-even here is not the month when the mortgage payment drops below rent. It is the first month when the buyer’s estimated position — sale proceeds plus any invested savings — is ahead of the renter’s investment account plus the returned deposit. If that never happens within 30 years, the result says so. If it happens in the first month, the result says buying is ahead almost immediately, which usually means rent is high relative to the cost of owning or the transaction costs are very small.

Move the timeline to read the positions at a specific year. The five-year and ten-year cards stay put so you can see both a shorter and a longer stay without losing the year you are exploring.

Example: renting vs. buying a $400,000 home

This illustration uses the calculator’s starting inputs, not a forecast. The home price is $400,000, monthly rent is $2,200, and the down payment is 20% ($80,000). The rate is 6.5% on a 30-year fixed loan, about $2,023 a month in principal and interest. The first-year tax bill is $4,400 and homeowners insurance is $1,800. Appreciation, rent growth, and the investment return start at 3%, 3%, and 5%. Maintenance is 1% of value per year, buyer closing costs are 3%, and selling costs are 6%.

Under those assumptions, buying reaches an estimated break-even in 8 years, 4 months. After 5 years, renting is ahead by about $19,472. After 10 years, buying is ahead by about $13,826. Estimated home equity then is about $266,283 before selling costs. The first-year cash outlay to own is about $2,873 a month, compared with about $2,215 to rent. The scenario table on this page moves appreciation and rent growth up and down so you can see that the break-even is not a single fact about the house.

Factors that can change the rent vs. buy decision

Small changes in the assumptions move the break-even by years. These are the levers that matter most in this model.

• Mortgage rates. A higher rate raises interest and slows principal paydown. Test a rate in the field above, then compare it with a payment in the mortgage payment calculator. The rate you type here is not a quote.
• How long you stay. Selling costs are paid if you leave. A short stay has little time for equity to offset them.
• Home appreciation. This is the most powerful buying input, and the least knowable. Use zero, or a decline, if you want a restrained case.
• Rent increases. Faster growth raises the renter’s cost and can pull break-even earlier. Flat rent does the opposite.
• Maintenance. The default is 1% of the current value per year. Older homes and homes with more deferred work can cost more.
• Property taxes and insurance. Enter the bills you would actually pay. The prefilled amounts are national-style illustrations, not a ZIP-code quote.
• Investment returns. A higher return makes the renter’s invested down payment more valuable and usually pushes break-even later. It is not a projection of any portfolio.
• Closing costs and selling costs. Buyer closing costs are spent up front. Selling costs come out of the future price. The closing cost calculator itemizes the buyer side if you want a dollar figure instead of a percent.

The model does not apply the mortgage-interest deduction, the property-tax deduction, or the primary-home capital-gains exclusion. Those depend on income, filing status, how long you own, and whether you itemize. It also does not know your credit, the loan program, or local rents. If you are weighing a purchase, the affordability calculator and the down payment calculator answer different questions: what price fits a budget, and how much cash a program may require. Loan paths such as conventional, FHA, and VA change the down payment and mortgage insurance, which you can approximate here by editing those fields.