Rent vs Buy Calculator: A Worked 7-Year Comparison
Short answer: a rent vs buy calculator compares the full cost of owning (payments, taxes, insurance, upkeep, closing and selling costs, less the equity you keep) with the rent you would pay and what your down payment could earn elsewhere. In the worked example below, a $400,000 home against $2,300 rent breaks even at about seven years: renting costs less over 3 and 5 years, and buying costs less over 10 and 15.
Key takeaways
- Buying costs more than the mortgage payment: tax, insurance, upkeep, closing and selling costs all count.
- Owning builds equity, and renting leaves your down payment free to be invested. A fair comparison counts both.
- The break-even point depends on how long you stay. Short stays favour renting, and long stays favour buying in this example.
- Small changes in assumptions, such as price growth or rent growth, move the result. Test several.
What assumptions does the example use?
| Input | Assumption |
|---|---|
| Home price | $400,000 |
| Down payment | $80,000 (20%), loan $320,000 |
| Mortgage | 6.5%, 30 years, payment $2,022.62 |
| Property tax, insurance, upkeep | $4,400, $1,400 and $4,000 a year (1.1%, 0.35% and 1% of price), held flat |
| Closing costs at purchase | 3% ($12,000) |
| Selling costs | 6% of the sale price |
| Home price growth | 3% a year |
| Rent | $2,300 a month, rising 3% a year |
| Return on cash not tied up in a home | 7% a year |
These are illustrations, not forecasts. Replace each with your local numbers.
How do the totals compare?
For each stay length, the table shows the net cost of owning (all cash paid out, minus what you would receive on selling, after selling costs and repaying the loan), the same figure plus the growth your down payment and closing costs could have earned if invested, and total rent.
| Years | Owning, net cost | Owning, plus forgone growth on cash | Renting, total rent |
|---|---|---|---|
| 3 | $91,884 | $112,588 | $85,309 |
| 5 | $126,025 | $163,060 | $146,532 |
| 7 | $157,399 | $213,131 | $211,484 |
| 10 | $198,685 | $287,663 | $316,403 |
| 15 | $249,465 | $411,296 | $513,330 |
At 3 years renting is cheaper, because buying and selling costs are spread over few years. By 7 years the two are nearly equal ($213,131 against $211,484). By 10 years owning is ahead, and by 15 it is ahead by about $100,000. Under these assumptions, the break-even is about seven years.
What does the table leave out?
- Monthly cash differences. Early on, owning takes more cash each month than renting. A renter who invested that difference would gain a little more, so the table slightly flatters buying in the early years.
- Taxes. Mortgage interest and property tax may or may not be deductible, depending on your return.
- Rising costs. Tax, insurance and upkeep usually grow over time.
- Non-money factors. Stability, freedom to move and the ability to renovate.
How sensitive is the result?
Quite sensitive. Slower home price growth pushes the break-even later, because the equity you build is smaller. Faster rent growth pulls it earlier, because renting becomes more expensive each year. A lower mortgage rate helps buying, and a higher return on invested cash helps renting. High property tax or high upkeep costs hurt the owner, and a short stay always hurts the owner through closing and selling costs. Change one input at a time and note how far the break-even moves. If the answer flips with small changes, treat it as a close call and decide on other grounds, such as stability or flexibility.
How do you run it for your own situation?
- Use local numbers for price, rent, tax and insurance.
- Decide how long you expect to stay. If it is under five years, renting is usually the safer bet in this model.
- Change the assumptions one by one. Slower price growth or lower returns shift the break-even.
- Check affordability separately. See can I afford to buy a house.
- Check your cash. See how long it takes to save a down payment.
For more on what changes the result, read which rent vs buy inputs actually matter, when renting forever wins and rent or buy in an expensive city. MoneyFrame's Decision Lab tests the choice against your own plan.
Sources and further reading: the Consumer Financial Protection Bureau has information on closing costs and the true cost of owning, and the IRS covers home-related tax rules.
General education, not financial advice. Reviewed October 2026. All inputs are illustrations. The model uses annual compounding on growth, constant tax and upkeep, and a 7% return on cash that is not guaranteed. Results change with your inputs.
Frequently asked questions
Is it cheaper to rent or buy?
It depends on how long you stay. In the worked example, renting is cheaper over 3 and 5 years, the two are about equal at 7 years, and buying is cheaper over 10 and 15 years.
How long do you need to stay to make buying worth it?
Often five to seven years, because closing and selling costs take years to recover. The break-even point depends on price growth, rent growth, interest rates and what your cash could earn.
What costs does a rent vs buy calculator include?
The mortgage payment, property tax, insurance, upkeep, closing and selling costs, the equity you keep, rent and its growth, and what your down payment could earn if invested instead.
Does a rent vs buy calculator include appreciation?
A good one does, as an assumption you can change. The example uses 3% a year, which is not a forecast. Lower growth makes the break-even later, and higher growth makes it earlier.
Is renting throwing money away?
Not necessarily. Rent pays for housing, much as interest, tax and upkeep do for an owner. The question is the total cost of each over the time you stay, including what your cash could earn.