Renting or buying: total cost of each path over your actual time horizon
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Cheaper Path
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Buying: Net Cost
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Renting: Net Cost
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Buying Wins From Year…
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Home Equity at Exit
Buying: net cost Renting: net cost
Net cost = all cash spent minus assets you'd hold at that point (home equity after selling costs for buying; invested savings for renting). Whichever line is lower in a given year is the cheaper path through that year.
Rent-vs-buy is the most argued question in personal finance, and most arguments compare the wrong two numbers: this month's rent against this month's mortgage payment. The honest comparison is net cost over your actual time horizon — buying carries closing costs, maintenance, taxes and a 6–7% exit toll, but builds equity; renting is lighter and keeps your down payment invested and compounding. This calculator runs both ledgers month by month and names the cheaper path for your numbers.
What Each Side of the Ledger Really Contains
Buying costs
Buying credits
Renting costs
Renting credits
Down payment + ~3% closing costs; monthly P&I; ~2.6%/yr of value in taxes, insurance and maintenance; ~7% selling costs at exit
Home equity at exit (appreciation + principal paid)
Rent, growing every year
Down-payment money invested and compounding; any monthly savings vs owning, also invested
The Horizon Rule
Round-trip transaction costs (~10% of the home's value to buy and sell) are the reason time horizon dominates this decision:
Under 3–4 years: renting nearly always wins — the entry/exit toll can't be amortized fast enough.
5–8 years: genuinely close; the calculator's break-even year does the deciding, and local price-to-rent ratios tip it.
10+ years: buying usually wins in most US markets — fixed P&I becomes cheaper than two decades of rent growth, and equity compounds.
The Price-to-Rent Shortcut
Price-to-rent ratio = Home price ÷ (Monthly rent × 12)
Ratio
Reading
Under 15
Buying strongly favored (much of the Midwest and South)
16–20
Toss-up — run the full calculator
21+
Renting favored on pure math (coastal metros); buying there is a lifestyle/appreciation bet
The defaults above ($380k price, $1,950 rent) are a ratio of 16.2 — right in the toss-up band, which is why the horizon input swings the verdict.
What People Systematically Get Wrong
Underestimating ownership friction: the 1%-of-value/yr maintenance rule is real (roofs, HVAC, water heaters arrive on schedule), and it's on top of taxes and insurance.
Ignoring the down payment's opportunity cost: $76,000 compounding at 7% is ~$122,000 in seven years — the renter's ledger gets that credit, and it's the single most forgotten line.
Treating rent as 'thrown away' but interest as 'ownership': in early years, 80%+ of a mortgage payment is interest, taxes and insurance — also 'thrown away' by that logic. Only principal builds equity.
Forgetting rent grows: a fixed-rate P&I payment never rises; rent compounds. Over long horizons this is buying's quiet superpower.
How to Use the Calculator
Enter a realistic home price and the rent for a comparable home — same neighborhood, same size. Comparing a 3-bed house to your current 1-bed apartment answers a different question.
Set your honest time horizon — job stability, family plans, how much you like the city.
Leave the growth defaults unless you know better (3.5% appreciation, 3.5% rent growth, 7% investment return are reasonable long-run figures).
Read the verdict and the break-even year, then stress-test: appreciation at 2%, investment return at 5%. If the verdict survives the stress, trust it.
Frequently Asked Questions
Is rent really 'throwing money away'?
No more than mortgage interest, property tax, insurance and maintenance are — none of those build equity either. Rent buys housing plus flexibility; the question is which bundle is cheaper over your horizon, which is exactly what the calculator computes.
What appreciation rate should I assume?
US homes have averaged 3–4% nominal annually over long periods, with brutal local variation. Use 3–3.5% as a neutral default and never justify a purchase by assuming boom-level appreciation — that's speculation wearing a budget.
Does the calculator include tax deductions for owners?
It omits the mortgage-interest deduction deliberately: since the standard deduction roughly doubled, most owners don't itemize, so the deduction is worth $0 to them. If you itemize with a large mortgage, buying does slightly better than shown.
What about the emotional value of owning?
Real, and beyond arithmetic — stability, control, no landlord. The calculator's job is to price the difference so you know what the feeling costs; sometimes it's cheap, sometimes it's $100,000.
How do rising or falling mortgage rates change this?
Higher rates raise buying's cost directly and usually cool appreciation; the calculator takes whatever rate you enter. If you expect to refinance later, run today's rate — refinancing is a future option, not a plan.
Should I include HOA fees?
Yes — fold them into the maintenance percentage (an extra $300/mo on a $380k home ≈ +0.95%/yr). Condos typically justify a higher maintenance input than houses.
Is my data private?
Yes — the entire simulation runs locally in your browser; nothing is uploaded.
There is no universal answer — there's your city's price-to-rent ratio, your horizon, and your discipline about investing the difference. Run your real numbers, stress them, and either way you'll make the housing decision the way it should be made: once, calmly, with the ledger in view.