How the comparison works
Renting is simple to cost: it's the rent you pay. Buying is harder, because much of what you pay comes back when you sell. So this calculator works out the net cost of buying as everything you pay out (down payment, closing costs, mortgage payments, property tax, insurance and maintenance), plus what your down payment and closing costs could have earned if you'd invested them instead, minus the cash you'd walk away with after selling the home and paying off the mortgage.
Whichever is lower is cheaper over the period you enter. The breakeven year is the first year in which buying comes out ahead. Sell before then and renting would have cost less.
Why the number of years matters most
Buying has large one-time costs: closing costs when you buy and selling costs when you leave. Spread over two or three years they usually swamp any gain; spread over ten they matter much less. Meanwhile each mortgage payment slowly builds equity and, if prices rise, the home's value grows on the whole price, not just your down payment. That's why buying tends to lose over short stays and win over long ones, and why the breakeven year is the most useful number on this page.
On the default inputs it's close: renting is cheaper for the first 7 years, by $2,121 at the 7-year mark, and buying pulls ahead in year 8. Stay 10 years and buying comes out $27,171 ahead.
The assumptions that swing the answer
Home price growth and the investment return are guesses about the future, and small changes move the result a lot. Try a pessimistic case (flat prices, a good investment return) and an optimistic one before deciding. Rent growth matters too, because the cost of renting compounds over time while a fixed-rate mortgage payment doesn't.
To keep the comparison honest and simple, the model leaves some things out: tax effects (such as the mortgage interest deduction, which only helps if you itemize, and capital gains tax on a sale), PMI, HOA dues and renter's insurance. It also assumes the renter invests the down payment but not any monthly savings. If renting is much cheaper month to month and you would actually invest the difference, renting looks better than shown here.
Money isn't the only factor. Buying brings stability and control over the home; renting brings flexibility and no surprise repair bills. Use the numbers to see what the choice costs, then decide.
The formulas
Net cost of renting = total rent paid over N years (rent grows each year)Net cost of buying = down payment + closing costs + mortgage payments + tax + insurance + maintenance + lost investment return − sale proceedsLost investment return = (down payment + closing costs) × ((1 + i)^N − 1)Sale proceeds = home value × (1 − selling cost %) − remaining loan balance- N = years you stay
- i = investment return per year
- Home value after N years = price × (1 + growth)^N
Example: $400,000 home vs $2,200 rent, staying 7 years
- Renting: $2,200 a month rising 3% a year adds up to $202,289 over 7 years.
- Buying: 20% down ($80,000) plus 3% closing costs ($12,000) = $92,000 up front. The $320,000 mortgage at 6.5% costs $2,022.62 a month.
- Over 7 years you pay $169,900 in mortgage payments and $78,157 in property tax, insurance and maintenance (all growing 3% a year with the home's value). The $92,000 up front would have earned $37,453 at 5% a year.
- After 7 years the home is worth $491,950. Less 6% selling costs and the $289,332 still owed, you walk away with $173,101.
- Net cost of buying: $92,000 + $169,900 + $78,157 + $37,453 − $173,101 = $204,409.
- Renting costs $202,289, so over 7 years renting comes out $2,121 ahead (the figures are rounded to the dollar). By year 8 buying is ahead.
Frequently asked questions
Is it cheaper to rent or buy?
It depends mostly on how long you stay. Buying has big one-time costs that take years to recover, so short stays usually favor renting and long stays usually favor buying. The breakeven year tells you where the line falls for your numbers.
What is the price-to-rent ratio?
The home price divided by a year's rent for a comparable place. The example home is $400,000 against $26,400 a year in rent, a ratio of about 15. Higher ratios generally mean renting is relatively cheaper, but the full comparison here is more reliable than the ratio alone.
Isn't rent just throwing money away?
No more than mortgage interest, property tax, insurance and maintenance are. Those costs don't build equity either. The fair comparison is the one this calculator makes: the unrecoverable costs of each choice.
What investment return should I use?
Use a return you could realistically expect, after fees, on money you'd otherwise keep invested for the same period. A higher return favors renting; a lower one favors buying. Try a few values to see how sensitive your result is.
Does this include the mortgage interest tax deduction?
No. The deduction only helps if you itemize, and many homeowners take the standard deduction instead. If you would itemize, buying looks somewhat better than shown.
Sources
Last reviewed for 2026. How we calculate.