Is it better to rent or buy a house?
It depends on how long you'll stay, your local price-to-rent ratio, mortgage rates, expected home appreciation, and how much your down payment could earn if invested instead. Buying typically wins over long horizons (7+ years) in affordable markets; renting often wins for shorter stays or in expensive markets. This calculator runs the exact math for your situation.
How does this calculator decide which is better?
It simulates both scenarios month by month over your time horizon. The buyer's wealth at the end is the home's equity (value minus selling costs minus remaining loan balance). The renter's wealth is an investment portfolio that started with the down payment and closing costs and grew at your chosen investment return. Whichever ends higher wins.
What is a break-even year?
It's the first year where the buyer's net worth surpasses the renter's net worth. Before this year, renting is ahead; after, buying is ahead. If buying never overtakes within your time horizon, the break-even year is shown as "Beyond" your horizon and renting wins for that scenario.
Why is the renter's investment return important?
The renter's biggest financial advantage is investing the money a buyer ties up in a down payment and closing costs. If that capital can earn 6–8% per year in the stock market, it compounds into a large sum over time, often outpacing home appreciation. Lower assumed returns make buying look better; higher returns favor renting.
What is the price-to-rent ratio?
Divide the home's price by the annual rent for a comparable place. Ratios below 15 favor buying, 15–20 is mixed, 20–25 favors renting, and above 25 strongly favors renting. It's a quick gut-check before running detailed calculations like the ones this tool performs.
Does this account for tax deductions?
No. Tax treatment varies widely by country, state, and individual situation. In the US, mortgage interest deductions are now limited and only matter if you itemize. Capital gains exclusions on a primary residence can also affect the answer. Treat the result as a pre-tax comparison and adjust for your specific tax situation.
Should I really budget 1% per year for maintenance?
It's a widely cited rule of thumb but actual maintenance varies. New construction may cost less in the short term, while older homes can cost more. Long-term studies suggest 1–2% per year on average across major systems, repairs, and replacements. Use a lower number for newer or smaller homes and a higher number for older properties.
What if I plan to move in a few years?
Short horizons strongly favor renting. Buying involves heavy upfront costs (closing fees, down payment) and selling costs (6–8% in agent commissions) that need years of appreciation and equity buildup to recover. As a rough rule, if you'll move within 3 years, renting almost always wins on the pure math.
Should I consider non-financial factors?
Yes. The math is only part of the decision. Buying offers stability, the freedom to renovate, and forced savings through equity buildup. Renting offers flexibility, less maintenance hassle, and easier career mobility. Use this calculator to find the financial answer, then weigh the lifestyle factors that matter to you.
What home appreciation rate should I use?
Long-term US home appreciation has averaged roughly 3–4% per year, though it varies dramatically by decade and region. The default 3% is a reasonable conservative number. Lower in stagnant markets, higher in hot growth markets, but avoid using recent boom-period rates as a long-term assumption.
Does the calculator include opportunity cost?
Yes — this is critical and often missing from simpler tools. The renter's down payment and closing-cost savings are invested at your chosen return rate, and any month where rent is less than total owning costs, the difference is also invested. This makes the comparison apples-to-apples.
How accurate is this rent vs buy calculator?
The math is precise for the assumptions you enter. Accuracy depends on how realistic your assumed appreciation, rent inflation, investment returns, and maintenance costs prove to be. Markets are unpredictable, so test a range of assumptions to understand how robust your decision is to different futures.
