How the comparison works
Instead of comparing monthly payments, the calculator compares net wealth at the end of your stay:
- Buyer: the home’s value after appreciation, minus selling costs and the remaining mortgage, plus anything invested in months when owning cost less than renting.
- Renter: the down payment and closing costs they didn’t spend, invested, plus the monthly difference whenever renting is cheaper than owning.
Owning costs include principal and interest, property tax, and maintenance and insurance. Rent rises each year by the rent-increase rate.
Example
For a $400,000 home with 20% down at 6.5% versus $2,200 rent, staying 7 years leaves the renter about $15,000 ahead under the default assumptions — mostly because buying and selling costs about 9% of the price. Stay longer, or assume faster appreciation, and buying usually pulls ahead.
When buying tends to win
- You’ll stay at least 5–7 years, giving appreciation and equity time to outrun transaction costs.
- Local rents are high relative to prices (a low price-to-rent ratio).
- You can get a competitive mortgage rate.
When renting tends to win
- You may move within a few years.
- Home prices are very high relative to rents.
- You’ll actually invest the money you save — the renter’s advantage depends on it.
Related Housing Economics & Wealth Tools
Evaluating the financial trade-offs between renting and homeownership requires net present value modeling. Calculate 30-year amortization and tax deductions with our Mortgage Calculator, check your underwriting qualification ceiling using the Home Affordability Calculator, calculate required down payment cash with the Down Payment Calculator, and model alternative portfolio gains using our Investment Calculator.
Frequently asked questions
What is the price-to-rent ratio?
Home price divided by a year's rent for a similar home. Below about 15 generally favors buying; above about 20 often favors renting.
Does this include the mortgage interest tax deduction?
No. With the higher standard deduction, most homeowners no longer itemize, so the deduction often provides little benefit. Leaving it out keeps the comparison conservative.
Isn't rent just throwing money away?
Not exactly. Owners also have unrecoverable costs — interest, property tax, maintenance, insurance and transaction fees. The real question is which unrecoverable costs are lower for you.