Buy vs Rent Calculator
Compare the true cost of buying versus renting over your planned time horizon. Accounts for mortgage interest, property tax, insurance, maintenance, home appreciation, rent increases, and the opportunity cost of investing the down payment.
Return you'd earn investing the down payment and any monthly savings in index funds.
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Frequently asked questions
What is the 5% rule for buying vs renting?
Personal finance writer Ben Felix's 5% rule: estimate annual ownership cost as 5% of home value (1% property tax + 1% maintenance + 3% opportunity cost of equity). Divide by 12 to get the equivalent monthly rent. If actual rent in your market is lower than that figure, renting and investing the difference often wins. If rent exceeds 5%/12 of home value, buying tends to win. This calculator runs the full simulation, but the 5% rule is a useful sanity check.
How does time horizon matter?
Buying has high upfront costs (down payment, closing costs of 2-5%, moving, sometimes PMI) that you only recoup through years of appreciation and amortization. Most simulations find the break-even at 5-7 years; under 5 years, transaction costs and the lower mortgage-principal-paid window mean renting usually wins financially. Above 10 years, buying tends to dominate unless your local appreciation rate is very low.
What if home prices drop?
Set the home-appreciation input to a negative number (e.g., -1% or -2%) to model declining markets. Renters benefit when home prices fall because they didn't tie up capital in a depreciating asset and can reinvest at lower prices later. Historically, U.S. home values have averaged about 3-4% nominal growth long-term, though regional and decadal variation is substantial.