Rent vs. Buy Calculator
Use your own numbers after reviewing the formula and worked example.
Quick answer
Renting and buying create different cash flows, so a fair comparison uses the same time horizon and accounts for ownership costs and equity.
Formula or method
Keep units, percentages and time periods consistent. The formula is useful as a transparent check on the calculator result and helps explain why changing one input changes the answer.
Step-by-step
- Choose a time horizon.
- Estimate rent and rent increases.
- Estimate mortgage, taxes, insurance, maintenance and transaction costs.
- Estimate remaining loan balance and potential home value.
- Compare net costs.
Worked example
A $2,000 rent and a $2,000 mortgage payment are not automatically equivalent because ownership adds other costs while also building equity.
How to interpret the result
Results are sensitive to how long you stay, appreciation, rent growth, maintenance and selling costs.
When the answer is used for a purchase, loan, payroll decision, construction order, school grade, health estimate or other real-world choice, verify the assumptions that matter in that context. Accurate arithmetic still depends on accurate inputs.
Common mistakes
- Comparing rent with mortgage principal-and-interest only.
- Ignoring buying and selling costs.
- Assuming appreciation is guaranteed.
Frequently asked questions
Is buying always better if the mortgage payment is lower?
No; ownership has additional costs and transaction expenses.
Why does time horizon matter?
Transaction costs are easier to spread over a longer stay.
Is principal repayment a cost?
It reduces cash flow but generally builds equity rather than being fully consumed.