Rent vs. Buy Calculator
Buying builds equity but comes with closing costs, upkeep and a large sum tied up in the down payment. Renting costs less up front but builds nothing. Which is cheaper depends mostly on how long you stay.
Enter your figures below. Results update as you type.
After 7 yearsRenting costs lessby $588.15
- Net cost of buying
- $165,423.92
- Net cost of renting
- $164,835.76
- Buying becomes cheaper
- not within 7 years
- Monthly mortgage payment
- $2,022.62
- Cash needed to buy
- $92,000.00
Buying is charged 3% of the price in closing costs and 6% of the sale price when you sell. Renting is credited with the investment growth on the cash you did not spend up front. Tax effects are left out.
- Buying
- Renting
How the Rent vs. Buy calculation works
Cost of buying = cash paid - equity after selling; cost of renting = rent paid - growth on the cash kept invested
For a $400,000 home with 20% down at 6.5%, against $2,200 rent rising 3% a year, the two come out almost level after 7 years: about $165,000 either way. Stay longer and buying pulls ahead; leave sooner and renting wins, because buying and selling costs have less time to be absorbed.
Frequently asked questions
Is it cheaper to rent or buy?
It depends on how long you stay. Buying usually costs more in the first few years because of closing and selling costs, and becomes cheaper once enough equity has built up. The chart shows where the lines cross for your figures.
What is the 5% rule for rent vs. buy?
A rough test: multiply the home's price by 5% and divide by 12. If the rent for a similar home is lower than that, renting is likely cheaper. For a $400,000 home the figure is $1,667 a month.
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