Rent vs Buy Calculator

Why this isn't simple

"Rent is throwing money away" is wishful thinking. Mortgage interest, property tax, maintenance, insurance, and the opportunity cost of your down payment are all also "money away" — they don't build equity.

What this calculator does:

Buying: principal + interest + tax (1.1%) + maintenance (1%) + insurance (~$1,500/yr) + selling costs (7%) when you exit.
Renting: rent paid + the down payment + monthly savings invested at your alternative return.

Sensitive inputs

Three things swing the answer most:

Investment return — at 7%+, renting and investing the difference often wins.
Holding period — selling costs and closing costs are amortized over the years you own. Short horizons (<5 yr) almost always favor renting.
Home appreciation — historic US average is ~3% (matching inflation). Local markets vary wildly.

How the comparison works

Both sides start from the same down payment and run month by month for the horizon you set:

buyPosition = homeValue × (1 − sellingCosts) − loanBalance

rentPosition = investmentBalance

On the buy side, home value grows at the appreciation rate and the loan balance shrinks per its amortization schedule; the equity is what's left after paying a selling-cost percentage (7% default — agent commission plus closing) to convert the house back into cash. On the rent side, the down payment is invested from day one, and whenever renting costs less than owning that month, the difference is invested too, compounding at your assumed return.

The mortgage-interest tax deduction is estimated at a 22% marginal rate and folded into the buy side's total cost — a rough adjustment, since it depends heavily on whether you itemize and the SALT deduction cap.

Worked example

$500,000 home, 20% down ($100,000), 6.5% mortgage, 3% appreciation. Renting the equivalent place: $2,400/mo, growing 3%/year, with the difference invested at 7%. Horizon: 10 years.

After 10 years, the home is worth about $671,958 against a remaining loan balance of $339,105. Sell it and pay 7% selling costs and you net roughly $285,817 in proceeds. The renter, investing the $100,000 down payment plus the monthly gap between rent and homeownership costs at 7%, ends up with an investment balance of about $362,698 — renting comes out about $76,881 ahead under these specific assumptions. Push the investment-return field down to 4–5% or extend the horizon well past 10 years and the answer can flip.

Frequently asked questions

Why can renting win even though home prices go up?

Because the down payment and any monthly savings from renting don't sit idle — they're invested. If your assumed investment return (7% here, roughly the long-run stock market average) beats the home's appreciation rate (3% here, roughly long-run inflation) by enough, the compounding on the invested cash outpaces the compounding on home equity.

What if I plan to stay much longer than 10 years?

Extend the "Years" field. Selling costs and the years of rent-vs-own gap get amortized over more time, and mortgage balances shrink faster in the later years of a loan, so buying tends to look relatively better the longer you hold. Try 20 or 30 years with the same inputs and compare.

Does this account for the mortgage interest tax deduction?

Yes, roughly — it applies a 22% marginal tax rate to total mortgage interest paid and credits that to the buy side. It's a simplification: it doesn't check whether you'd actually itemize (versus taking the standard deduction) or account for the SALT cap, both of which can shrink the real benefit.

What isn't modeled here?

Renter's insurance, moving costs, mortgage points, refinancing partway through, extra principal payments, rent control, and landlord-covered repairs are all left out. This is meant as a directional comparison of the two paths, not a precise forecast of either one.