This calculator compares the total financial cost of renting a home against buying a comparable one over a period you choose. It accounts for closing costs, property tax, maintenance, HOA fees, PMI, the mortgage interest deduction, and the opportunity cost of your down payment. All assumptions are labelled and editable.
Property details
Assumptions (you can change these)
Ongoing costs
Tax
How to use this tool
n- Enter the home purchase price, your down payment percentage, mortgage interest rate, and loan term.
- Enter property tax rate, homeowner’s insurance, HOA fees, maintenance costs, and annual home appreciation rate.
- Enter equivalent monthly rent, annual rent increase, and how long you plan to stay. The 5-year and 10-year comparison will appear automatically.
Understanding your results
The calculator returns a net wealth figure for each option after the period you set, assuming you sell the property at the end. Net wealth for buying is the equity you walk away with after selling costs, minus all money spent on closing costs, property tax, mortgage interest, maintenance, and HOA or PMI. The mortgage interest deduction reduces that cost if you itemize. Net wealth for renting is the value of your invested down payment minus total rent paid.
The result is most sensitive to the property appreciation rate and investment return rate. At higher appreciation, buying wins. At higher investment returns on your down payment, renting wins. Neither outcome is guaranteed. Change the assumptions to see how the answer shifts under different scenarios.
Legal and tax context
The mortgage interest deduction allows homeowners who itemize federal deductions to deduct interest paid on mortgage debt up to $750,000 (for loans originated after December 15, 2017, under the Tax Cuts and Jobs Act). Homeowners who take the standard deduction do not benefit from this. The 2024 standard deduction is $14,600 for single filers and $29,200 for married filing jointly.
The Section 121 capital gains exclusion allows homeowners who have lived in their home as a primary residence for at least 2 of the past 5 years to exclude up to $250,000 (single) or $500,000 (married filing jointly) of capital gain from federal income tax when they sell. Gains above the exclusion are subject to federal long-term capital gains tax, typically 15% for most taxpayers. State capital gains tax is not modeled and varies by state.
Property transfer taxes vary by state and county. Some states (including Texas and Florida) have no state-level real property transfer tax. Others (such as Washington DC and Pennsylvania) have rates above 1%. The default closing costs figure in this calculator is intended to cover transfer taxes along with all other purchase transaction costs.
This calculator gives a financial estimate. It does not constitute financial, tax, or legal advice. Consult a licensed advisor before making a decision of this size.
Related tools
Legal context
nThe decision to rent or buy depends on local price-to-rent ratios, your time horizon, and available capital. The IRS allows homeowners to deduct mortgage interest and property taxes if they itemize deductions. Capital gains on a primary residence are excluded from tax up to $250,000 ($500,000 for married filing jointly) under Section 121 of the Internal Revenue Code, provided the home was the primary residence for at least 2 of the 5 years before sale.
nFrequently asked questions
What does the true cost of buying a home include?
Beyond the purchase price, buying includes closing costs of 2 to 5 percent (lender fees, title insurance, attorney fees, inspection), a down payment of 3 to 20 percent, ongoing property taxes averaging 1 to 2 percent of home value per year, homeowner’ insurance, HOA fees where applicable, and maintenance estimated at 1 percent of value annually. PMI applies until you reach 80 percent loan-to-value if your down payment is below 20 percent.
Why do financial planners cite a 5-year rule for buying?
Closing costs, real estate agent commissions (typically 5 to 6 percent on sale), and the slow early build of equity through amortization mean that selling within 5 years often results in a net loss relative to renting. The break-even period depends on local appreciation rates and the rent-to-price ratio. In high-cost metros with low yields, the break-even point can extend to 7 to 10 years.
How does the mortgage interest deduction work?
You can deduct mortgage interest on loans up to $750,000 (for mortgages originated after December 15, 2017) if you itemize deductions on Schedule A. However, the 2024 standard deduction is $14,600 for single filers and $29,200 for married filing jointly. Most homeowners, particularly in early years, do not pay enough interest to exceed the standard deduction, so the tax benefit is frequently overstated in pro-buying arguments.
What is the Section 121 capital gains exclusion?
Under IRC Section 121, homeowners who have lived in their primary residence for at least 2 of the past 5 years can exclude up to $250,000 of capital gain from federal tax if single, or $500,000 if married filing jointly. This exclusion applies once every two years. It is one of the strongest financial advantages of homeownership for long-term residents, though it does not eliminate state capital gains taxes in all cases.
What index should I use to estimate home price appreciation?
The S&P CoreLogic Case-Shiller Home Price Indices are the most widely cited measure of US residential property value changes. The national composite rose at an average annual rate of approximately 4 to 5 percent over the 20 years to 2024, though this masks large variation by metro area. For conservative projections, use 3 percent. For a stress test, run the calculator at 0 percent appreciation to see how the comparison holds without price growth.
How does a rent vs buy break-even analysis work?
A break-even analysis calculates the number of years after which the total cost of buying (including transaction costs, mortgage interest, taxes, and maintenance) equals the total cost of renting plus the opportunity cost of the down payment invested elsewhere. This calculator models that comparison year by year. The break-even year is when the cumulative cost curves cross.
What is the opportunity cost of a down payment?
The opportunity cost is the return you forgo by putting money into a down payment rather than investing it. If a $60,000 down payment could otherwise earn 7 percent annually in an index fund (approximating long-run US equity returns), the forgone return compounds significantly over 10 years. This cost partially offsets the equity building through mortgage repayment. The calculator models this using a configurable annual return rate.
How does renter’ insurance cost compare to homeowner’ insurance?
Renter’ insurance averages $15 to $30 per month and covers personal property and liability but not the building structure. Homeowner’ insurance averages $100 to $200 per month nationally but varies widely by state, property value, and coverage level. States with high hurricane, tornado, or wildfire risk, such as Florida and California, have seen significant premium increases in recent years, adding meaningfully to the true cost of ownership.
What does PMI cost and when does it end?
Private mortgage insurance (PMI) is required by most conventional lenders when the down payment is below 20 percent. It typically costs 0.5 to 1.5 percent of the loan balance annually, or $100 to $300 per month on a $300,000 loan. Under the Homeowners Protection Act of 1998, lenders must automatically cancel PMI once the loan-to-value ratio reaches 78 percent based on the original schedule. You can also request cancellation at 80 percent LTV.
How should I assess rent vs buy in a high-cost metro area?
In metros like San Francisco, New York, and Boston, price-to-rent ratios commonly exceed 30 to 40, meaning the annual rent is 2.5 to 3.3 percent of the purchase price. At these ratios, the financial case for buying weakens significantly unless you have a long time horizon and strong appreciation assumptions. Use the price-to-rent ratio as a quick screen: below 15 favors buying, 15 to 20 is neutral, above 20 increasingly favors renting on a pure cost basis.