myUSFinance
Rent vs Buy Calculator
Compare the financial impact of renting versus buying a home over time. This calculator includes home price, rent costs, mortgage payments, tax benefits, maintenance, and other key expenses to help you make informed decisions.
Rent vs Buy Analysis
Enter your financial details to evaluate the costs and benefits of renting vs buying over a specified period.
Understanding Rent vs Buy: A Complete Guide
The rent vs buy is one of the most significant financial decisions most Americans will make in their lifetime. With the median home price in the United States exceeding $400,000 and mortgage terms spanning 15 to 30 years, understanding every aspect of your mortgage is critical to long-term financial health.
This Rent vs Buy Calculator Calculator provides detailed analysis of your mortgage scenario, helping you understand monthly payments, total interest costs, and the true cost of homeownership. Whether you are a first-time homebuyer exploring affordability or a current homeowner considering refinancing, this tool gives you the data you need to make confident decisions.
Mortgage rates are influenced by a complex interplay of factors including Federal Reserve policy, inflation expectations, the bond market, your credit score, down payment amount, and loan type. Even a small difference in your mortgage rate — as little as 0.25% — can translate to tens of thousands of dollars over the life of a 30-year loan.
Understanding how principal and interest payments are allocated over time, how prepayments can accelerate your payoff timeline, and when refinancing makes financial sense are all essential aspects of mortgage literacy that this calculator helps illuminate.
How to Use This Rent vs Buy Calculator
- Enter your Home Price ($) — This value represents your home price
- Enter your Down Payment ($) — This value represents your down payment
- Enter your Loan Term (years) — This value represents your loan term (years
- Enter your Interest Rate (%) — This value represents your interest rate
- Enter your Annual Property Tax ($) — This value represents your annual property tax
- Enter your Annual Home Insurance ($) — This value represents your annual home insurance
- Enter your Maintenance Rate (%) of Home Price — This value represents your maintenance rate (%) of home price
- Enter your Monthly HOA Fees ($) — This value represents your monthly hoa fees
- Click Calculate — Review your results in the output section below the form. The calculator instantly computes all values based on your inputs.
- Adjust and Compare — Modify any input to see how changes affect the result. Try different scenarios to find the optimal approach for your situation.
All calculations are performed instantly in your browser. Your data is never sent to any server or stored anywhere — your financial information remains completely private.
Formula and Methodology: Rent vs. Buy Comparison Formula
Annual Cost of Owning = Mortgage P&I + Taxes + Insurance + Maintenance + PMI - Tax Deduction - Equity Built - Appreciation
Annual Cost of Renting = Rent × 12 + Renters Insurance - Investment Return on Down Payment
Where:
- Mortgage P&I — Monthly principal and interest payment
- Property Taxes — Annual property tax (typically 0.5-2.5% of home value)
- Maintenance — Annual upkeep costs (budget 1-2% of home value)
- Appreciation — Expected annual home value increase (historical average 3-5%)
- Equity Built — Principal portion of mortgage payments that build ownership
- Opportunity Cost — What your down payment could earn if invested instead
Worked Example
Buying: $350,000 home, 20% down ($70,000). Monthly PITI: $2,200. Maintenance: $350/month. Total monthly: $2,550. Renting: $1,800/month. Investing $70,000 at 7%. After 7 years, buying becomes cheaper when appreciation ($70,000+) and equity ($40,000+) exceed the cumulative cost difference and opportunity cost.
Limitations and Assumptions
The price-to-rent ratio (home price ÷ annual rent) indicates which option is favorable: below 15 favors buying, above 20 favors renting. Transaction costs (6% selling costs, closing costs) mean buying only makes sense for 5+ year stays. Non-financial factors — stability, customization, flexibility — also matter significantly in this decision.
Key Concepts and Definitions
Understanding the following key concepts will help you interpret your results and make better financial decisions:
- Principal — The initial amount of money involved in the calculation, whether it is a starting balance, loan amount, or investment.
- Interest Rate — The percentage charged or earned on the principal amount, typically expressed as an annual rate (APR). This rate determines how quickly your money grows or how much borrowing costs.
- Compounding — The process of earning interest on previously earned interest. More frequent compounding (daily vs. monthly vs. annually) results in higher effective returns or costs.
- Time Horizon — The length of time over which the calculation applies. Longer time horizons amplify the effects of compounding and small differences in rates.
- Present Value vs. Future Value — Present value is what money is worth today; future value is what it will be worth at a specific point in the future, accounting for growth or inflation.
These concepts form the foundation of virtually all financial calculations. Understanding how they interact helps you evaluate any financial product or decision with confidence.
Real-World Example: Putting the Rent vs Buy to Work
Let's walk through a practical home-buying scenario.
Scenario: The Martinez family is looking to buy a $350,000 home. They have $70,000 saved for a down payment (20%) and have been pre-approved at 6.75% for a 30-year fixed mortgage.
- Loan amount: $280,000
- Monthly P&I payment: $1,816
- Monthly property tax (est.): $292
- Monthly insurance: $125
- Total monthly housing cost: $2,233
- Total interest over 30 years: $373,760
By putting 20% down, the Martinez family avoids PMI (private mortgage insurance), saving approximately $117 per month. Over the first five years, they will pay approximately $88,000 in interest and only $21,000 in principal — a common surprise for new homeowners.
If they make one extra monthly payment per year ($1,816), they would pay off the mortgage in approximately 25 years and save over $62,000 in total interest. This calculator helps visualize these powerful long-term impacts.
Scenario Comparison: Rent vs. Buy Break-Even by Market
How long you need to stay for buying to beat renting in different price-to-rent ratio markets.
| Market Type | Price-to-Rent Ratio | Example Cities | Break-Even | Recommendation |
|---|---|---|---|---|
| Buyer-Friendly | Under 15 | Detroit, Cleveland, Memphis | 2-3 years | Buy if staying 3+ years |
| Balanced | 15-20 | Atlanta, Dallas, Phoenix | 4-6 years | Buy if staying 5+ years |
| Renter-Friendly | 20-25 | Denver, Portland, Austin | 7-10 years | Buy if staying 7+ years |
| Strong Rent | Over 25 | San Francisco, NYC, LA | 10+ years | Renting often cheaper |
