Rent vs Buy Calculator
Compare buying a home with renting on a like-for-like basis. The calculator equalises monthly cash flow, compounds the renter's alternative investment, and reports the break-even year where buying pulls ahead.
Break-even point (years)
15
- Buyer net wealth at 5 years
- £119,134.15
- Renter net wealth at 5 years
- £162,318.78
- Buyer net wealth at 10 years
- £214,092.02
- Renter net wealth at 10 years
- £240,338.01
- Buyer net wealth at 30 years
- £1,036,821.98
- Renter net wealth at 30 years
- £783,287.83
- Initial cash outlay (buyer)
- £92,000.00
- Monthly P&I (fixed)
- £2,022.62
Buying beats renting after 15 years at these inputs. This compares buying versus renting after equalising monthly cash flow: whichever scenario costs more in a given month, the other invests the difference at your chosen return rate. Net wealth for the buyer includes home equity after selling costs less the mortgage balance; for the renter it is the investment account that started with the equivalent of the down payment and closing costs.
How to use this calculator
Enter the home price, the down payment as a percentage, the mortgage rate and term, ongoing ownership costs (property tax, maintenance, homeowners insurance, HOA), and the assumed home-appreciation rate. Set the buyer's closing costs and the selling costs you'd pay on exit. Then enter the equivalent monthly rent for a similar home, the rent-inflation rate, renters' insurance, the after-tax return you'd earn on invested cash, and the comparison horizon. Results update as you type. The headline figure is the break-even year — the first year where buying produces more net wealth than renting.
How the calculation works
The calculator runs a month-by-month simulation of both scenarios using the equalised-cash-flow method popularised by the New York Times "Is It Better to Rent or Buy?" calculator. Each month, whichever household has the lower housing outflow invests the difference at the chosen return rate, so both face the same effective cost of living. Mortgage payments use the standard amortisation formula. Home value grows at the appreciation rate; rent grows at the rent-inflation rate; property tax, maintenance, and insurance scale with the home value. At each year-end the simulation computes net wealth: for the buyer, that's the investment account plus net sale proceeds (home value minus selling costs minus mortgage balance); for the renter, it's the investment account that began with the equivalent of the buyer's down payment and closing costs. The break-even year is the first year buyer net wealth meets or exceeds renter net wealth.
Worked example
Home price $400,000, 20% down, 6.5% mortgage over 30 years, 1.1% property tax, 1.0% maintenance, 0.4% insurance, no HOA, 3% home appreciation, 3% closing costs, 7% selling costs. Equivalent rent $2,200/mo growing at 3%/yr, $15/mo renters' insurance, 6% investment return. Year-1 buyer outflow ≈ $2,856/mo (P&I $2,023 + tax $367 + maintenance $333 + insurance $133); year-1 renter outflow ≈ $2,215. The renter invests the $641/mo gap plus the $92,000 upfront the buyer locks into the house. At a 6% return, that head-start grows fast — buying typically does not catch up until roughly years 9–12 at these inputs.
Frequently asked questions
Why is the break-even year so sensitive to small changes?
A few percentage points of mortgage rate, home appreciation, or investment return can move the break-even point by years. That's because the calculation is the *difference* between two large, slow-compounding totals — a small advantage to either side compounds over decades. The defaults represent reasonable mid-2020s assumptions, but the honest answer to "is it better to rent or buy?" is "it depends on the inputs you trust most." Try a few plausible scenarios rather than treating any single break-even number as definitive.
Does the calculator account for the mortgage interest tax deduction?
No. Tax treatment varies hugely by jurisdiction and personal circumstance — in the US, the 2017 TCJA capped SALT deductions and roughly doubled the standard deduction, so the average homeowner no longer itemises; in the UK, mortgage interest relief on a primary residence was abolished in 2000. Adding a generic tax-shield would mislead more readers than it helped. If you do itemise and are in a high-tax US state, your effective ownership cost is lower than the calculator shows — adjust the maintenance or insurance rate downward as a rough proxy, or compute the deduction separately.
What if rents grow faster than home prices, or vice versa?
The two inputs are independent on purpose. In some markets (post-pandemic Sun Belt cities, parts of the UK Midlands) rents have outpaced home prices; in others the reverse holds. If rent inflation exceeds home appreciation, buying breaks even sooner because the renter's monthly cost catches up to fixed P&I faster. If home appreciation outpaces rent inflation, buying still breaks even sooner — because the equity stake gains more value. The most punishing scenario for buying is high transaction costs combined with flat appreciation and modest rent growth.
Why is the investment return such a big driver?
The renter starts with a head-start equal to the buyer's down payment plus closing costs — for a $400,000 home at 20% down with 3% closing, that's $92,000 in investable cash on day one. At 6% real return, $92,000 doubles in roughly 12 years; at 8% it doubles in 9. The buyer has to overcome that head-start through home equity. Pick a return that reflects what you'd actually do with the cash — an emergency fund earning 4% behaves very differently from a leveraged equity portfolio at 8%.
How realistic is the 1% annual maintenance assumption?
It's a widely cited rule of thumb (Fannie Mae, Bankrate, most personal-finance textbooks) for a single-family home — covering routine repairs, replacements on a 15-to-30-year cycle (roof, HVAC, water heater, appliances), and minor renovations. Newer homes and condos typically run lower (0.5–0.75%); older homes, homes in extreme climates, and homes with pools, septic systems, or wells run higher (1.5–2%+). HOA dues for condos partly substitute for maintenance, so if you raise HOA, lower this rate. Treat the default as a planning figure, not a forecast.
Should I include opportunity cost on the equity built up over time?
The simulation handles this implicitly. As the buyer pays down principal, equity builds up — but that equity is locked in the house and can't be invested. The renter's alternative investment account grows by the equivalent of those locked-up dollars plus market returns, so the comparison stays apples-to-apples. The only equity gain that "counts" for the buyer is what survives selling costs at exit. That's why high selling costs (the 6–8% typical in the US, lower elsewhere) push back the break-even point so dramatically.