Is It Cheaper to Rent or Buy?

Is it cheaper to rent or buy?

The honest answer is "it depends on how long you'll stay" — and this calculator turns that into a number. Buying carries heavy upfront and exit costs, so over a short horizon renting almost always wins; over a long one, equity and appreciation tip it toward buying. The break-even year is where the two lines cross.

To keep the comparison fair, it counts more than the monthly payment. Buying accrues equity (principal paid down) and appreciation, minus selling costs. Renting frees up the down payment to be invested, so the model credits renting with that investment growth. Comparing only "rent vs. mortgage payment" is the classic mistake — it ignores both the equity you build and the returns you give up.

It's a simplified estimate, not financial advice — but it doesn't quietly round in either direction. Every assumption is listed and editable, and the excluded items are named below rather than left implied.

How long do you have to stay in a house to break even?

Long enough for equity and appreciation to cover the cost of getting in and out. Those transaction costs together commonly run 8–12% of the home's value — roughly 2–5% to buy and 5–6% to sell — which is where the familiar "five-year rule" comes from.

Treat five years as a starting point, not an answer. With higher mortgage rates the break-even stretches, because more of each early payment is interest rather than principal; in cheaper markets with strong rent growth it shortens. The three presets above jump straight to the horizons people actually face — relocating in 3 years, a starter home over 7, and a forever home over 30.

If you're buying on a three-year horizon, expect the maths to favour renting: three years of equity rarely covers roughly 6% selling costs. Strong appreciation can overcome it — the sensitivity readout shows exactly how much you'd need — but it isn't something to plan around.

Curious how your city compares? We ran 718 US metros through this same model using Zillow home-value and rent data — including a cross-check against Redfin prices that shows how much a break-even year can actually be trusted.

What this calculator includes — PMI, HOA, and growing costs

Most rent-vs-buy tools simplify in ways that happen to flatter buying. Three we deliberately don't:

PMI is charged automatically below a 20% down payment, and stops once the loan balance reaches 80% of the original price — the standard removal threshold. A calculator that lets you enter 5% down without charging mortgage insurance is overstating the case for buying by roughly $150–200 a month on a $400,000 home.

The renter invests the monthly difference, not just the down payment. When owning costs more per month than renting, that leftover cash is real money — crediting only the down payment is the single most common way these comparisons tilt toward buying.

Property tax, insurance, and maintenance grow with the home's value rather than being frozen at the purchase price. Over a 20- or 30-year horizon, holding them flat materially understates what owning costs.

HOA dues are their own monthly field, and closing costs, selling costs, renter's insurance, and the PMI rate are all editable rather than hard-coded behind the scenes.

The price-to-rent shortcut

Your results include the price-to-rent ratio — the home price divided by a year of rent — as a quick cross-check on the detailed comparison. It's crude by design and can't account for rates, taxes, or your time horizon, which is exactly why the full model above exists. For the bands, the formula, and what would have to change to move a market from one band to another, see the dedicated price-to-rent ratio calculator.

Calculator FAQ

Should I buy a house if I'm only staying 3 years?

On pure cost, usually no. Closing costs going in plus roughly 6% selling costs coming out rarely get offset by three years of equity and appreciation. Strong appreciation can beat it, but that's a bet rather than a plan. Use the "Relocating in 3 years" preset for your own numbers, then check how much appreciation buying would need to break even.

Does this include PMI and HOA fees?

Yes. PMI applies automatically under 20% down and drops off at 20% equity; HOA dues are a separate monthly input rather than being buried in maintenance. Both rates are editable, as are closing costs, selling costs, and renter's insurance.

Why does renting include an investment return?

Because a fair comparison accounts for opportunity cost. A buyer ties up the down payment and closing costs; a renter can invest that same money — and can invest the monthly difference whenever owning costs more per month. The "share of savings invested" field defaults to 100%, so the baseline makes no assumption about your discipline; dial it down and renting's advantage shrinks accordingly.

What if home prices fall?

Set appreciation to a negative number, or use the "If the market drops" preset. Because selling costs are charged against the sale price and the mortgage balance doesn't shrink when values do, a downturn hits the buying side hard over short horizons — which is exactly the scenario worth checking before you commit.

What does this calculator leave out?

Income taxes on investment gains, the mortgage-interest and property-tax deductions, the standard-deduction and itemization threshold, the capital-gains exclusion on a primary residence, adjustable-rate resets, and refinancing. It also uses fixed annual rates rather than modelling year-to-year variation. Treat the output as a directional comparison, not advice.

Also see: Rent affordability calculator · Mortgage payoff calculator · Savings calculator