How the rent vs buy comparison works
Rent or buy is one of the biggest money questions most of us ever face, and it is never only a money question. A home is where your kids learn to ride bikes and where you paint a wall without asking anyone. No spreadsheet prices that, and this one does not pretend to. What it does price, honestly, is the half of the decision that is money, because that half is usually argued with bad numbers on both sides.
The trick is that neither monthly payment tells you anything by itself. Buying looks expensive up front but part of every payment comes back to you as equity, and the home itself appreciates. Renting looks like money down the drain but the renter keeps the down payment and closing costs invested, earning returns the whole time. So this calculator runs two complete ledgers over the years you expect to stay. The buy ledger counts every dollar in (down payment, closing costs, principal and interest, property tax, insurance, maintenance, HOA) and then credits back the equity you would walk away with after selling, net of selling costs. The rent ledger counts every rent check and then credits back the investment gains on the money that never went into the house. The lower net cost wins, and if the two land within 10% of each other we say so plainly: that close is a coin flip, and the factors no model prices decide it.
The formula
Net cost of renting = (all rent + renters insurance) − investment gains on the money not spent buying
The mortgage is a standard 30 year fixed amortization on the price minus your down payment. Property tax, maintenance, and insurance scale with the home's value as it appreciates; rent grows at its own rate. The renter's portfolio starts with the down payment plus closing costs and adds (or draws down) each year's cash-flow difference between the two paths, growing at the after-tax return you choose.
Worked example
A $400,000 home with 20% down at 6.66% (the Freddie Mac 30 year average as of August 2026), against a comparable rental at $2,200 a month, over a 7 year stay, with every other assumption left at the defaults.
The buy side: principal and interest run $2,056.41 a month, and year one of owning costs about $2,923.07 a month all in. Over 7 years the buyer puts $344,427.73 into the house. At 3% appreciation it sells for $491,949.55; subtract $39,355.96 of selling costs and the $290,096.44 still owed, and the buyer walks away with $162,497.14 of equity. Net cost of buying: $181,930.59.
The rent side: rent grows 3% a year to $2,626.92 a month by year 7, totaling $203,549.00 with renters insurance. But the $92,000 that never went into a down payment and closing costs, invested at 5% after tax along with each year's savings, grows to $187,125.75, a gain of $46,247.03. Net cost of renting: $157,301.98.
Verdict: renting comes out ahead by $24,628.61, and buying never catches up inside the 7 year window. Stretch the same numbers to a 12 year stay and buying finally breaks even in year 12; at 15 years buying wins by $36,530.02. At August 2026 rates, time in the house is what decides it.
The five year rule, and why today it runs long
The old advice says do not buy unless you will stay five years, and the reason is arithmetic, not folklore. Between buying closing costs (about 3% of the price) and selling costs (about 8%, mostly agent commission), a round trip through homeownership costs roughly a tenth of the home's value before you have slept a single night in it. Appreciation and principal paydown need years to earn that back, and in the early years of a 30 year mortgage almost every payment dollar is interest, so the paydown is slow exactly when you need it most. In the worked example above, at a 6.66% rate, break-even does not arrive at year five at all: it arrives at year 12. When rates are high and the rent for a comparable place is moderate, the five year rule quietly becomes a ten year rule, and the only way to know your number is to run your numbers.
This answer is fragile, and you should treat it that way
Be suspicious of any rent vs buy calculator that hands you a confident winner, including this one. The verdict leans on guesses about the future, and the appreciation guess is the heaviest. In the worked example, moving appreciation from 3% to 4% turns a $24,628.61 win for renting into a coin flip; moving it down to 2% doubles renting's lead to $51,931.84. One percentage point, on one assumption, swings the answer by roughly $29,000. That is why the result includes a built-in stress test at one point less appreciation, and why the honest way to use this page is to run it three times: your best guess, a point lower, and a point higher. If the verdict survives all three, trust it. If it flips, the real answer is that the money side is close and your life plans should cast the deciding vote.
Why we do not credit a mortgage interest deduction
Older rent vs buy calculators hand the buyer a tax break for mortgage interest, and it made sense once. It mostly does not anymore. Since the 2017 tax law nearly doubled the standard deduction, roughly nine in ten households take the standard deduction and itemize nothing, which means the mortgage interest deduction saves them exactly zero dollars. Crediting buyers with a deduction most of them will never claim quietly flatters buying, sometimes by tens of thousands over a decade. So by design, this model credits no interest deduction. If you are the exception (a large mortgage, a high-tax state, itemizing anyway), your true buy cost is somewhat lower than shown here, and you likely have an accountant who can say by how much.
What no calculator can price
The model leaves things out on both sides, and it is only fair to name them. For buying: the joy and stability of a place that is yours, protection from a landlord selling the building or declining to renew, and the forced-savings discipline of a mortgage, which for many households is the only savings plan that ever actually happens. The renter's invested difference beats the buyer's equity only if the difference actually gets invested, every month, for years, and honesty requires saying that many of us would spend it. For renting: the freedom to leave for a better job in another city with 60 days notice, no surprise $14,000 roof, and no risk of buying at a local market peak. Also left out: PMI if you put down less than 20% (the result will warn you), refinancing if rates fall, and the possibility that your landlord raises rent much faster than your zip code's average. The math will get you to the right neighborhood. You have to pick the house.