Rent vs. Buy Calculator

Should I Rent or Buy?


This crucial question faces every potential homeowner. Our Rent vs. Buy Calculator evaluates the decision purely from a financial standpoint, making several assumptions like constant home value appreciation and rental fee increase rates. We assume the user can afford either option and strive to provide the best results. However, because the calculator cannot predict the future, the results are estimates based on the input values. We have chosen not to incorporate potential ownership tax benefits into our calculator. This is due to frequently changing legislation, complexity, and the reality that most home buyers do not claim mortgage interest or other home ownership expenses on their taxes, for varying reasons. By omitting tax benefits, we also ensure international users have a similar user experience.

Intangible Factors in Renting vs. Buying


Numbers alone can’t capture the intangible aspects of renting versus buying. Homeownership offers the freedom to personalize your living space, while renting provides flexibility and lower upfront costs. Personal preferences should play a significant role in your decision.

Image shows a young couple buying a home with the assistance of a real estate agent. Text on the right reads: "While this calculator makes a Rent vs. Buy comparison based solely on financial data, the decision of where to live often comes down to other deciding factors."

Costs of Homeownership

Owning a home involves significant one-time transaction costs like down payments and closing costs. Recurring costs, known as PITI (Principal, Interest, Taxes, Insurance), are the primary expenses.

  • Principal: The loan amount, which builds home equity as it is paid down. When the principal portion of your mortgage payments are made, we do not count this in our cost of ownership, as the money spent on the principal portion of your mortgage payment is retained through a growth in equity as your loan balance is paid down.
  • Interest: The cost of borrowing. This is the portion of your mortgage payment that goes towards paying your lender interest on the outstanding loan principal, an expense which decreases over time as the loan is paid down.

If when using this calculator, the only user inputs are Home Price, Downpayment, Interest Rate and Loan Term, ownership cost would only consist of the interest portion of the amortizing loan payments.

Graph showing the cost of ownership decreasing over time.
  • Purchase Closing Costs: These are the fees and expenses incurred during the finalization of a real estate transaction, paid at the closing of the sale by the buyer. These costs typically include appraisal fees, title insurance, attorney fees, and loan origination fees, and can range from 2% to 5% of the home’s purchase price. Purchase Closing Costs can either be financed into the loan amount and amortized over the life of the loan, or paid up front in Year 1.
Graph showing ownership cost decreasing over time after purchase closing costs are financed into the loan amount.
Graph showing ownership costs decreasing over time after purchase closing costs are not financed into the loan amount.
  • Taxes: Annual property taxes paid to local jurisdictions. Our calculator allows the user to input this expense in dollars, or as a percentage of the properties value each year.
  • Insurance: Required homeowners insurance and potentially Private Mortgage Insurance (PMI), if the down payment is less than 20%. Our calculator allows the user to input this expense in dollars, or as a percentage of the properties value each year.
  • HOA Fees: If the property in question has a Homeowners Association (HOA), fees may be paid which cover community amenities, some maintenance, or other costs.
  • Maintenance Costs: These refer to the expenses necessary to keep a property in good condition, ensuring it remains attractive to tenants, complies with local regulations, and retains its market value. Our calculator allows for the user to input this expense in dollars, or as a percentage of the properties value each year.
Graph showing other homeownership expenses growing with time due to cost of living and inflation. Text at the top reads: "Other homeownership expenses, such as property taxes, insurance, HOA fees and maintainance costs, can be added to the calculator. These expenses will grow with time, along with the cost of living and inflation. You can adjust your expense growth based on your own forecast."
  • Opportunity Cost: The opportunity cost of using money for a down payment on a home instead of investing it in financial markets is the potential higher returns you might earn from the investment. For example, investing $50,000 in the stock market with an 8% annual return could grow to $108,000 in 10 years, whereas using it as a down payment would result in that money not being invested and generating a return beyond reducing housing expenses and capturing home value appreciation.
Graph showing the cost of ownership increasing with opportunity cost. Text on top of graph reads: "Opportunity cost, if average investment return is entered, further increases the cost of ownership over time. This is because whatever down-payment was made on the property could have instead been invested throughout the duration of homeownership. Equity built in the property over time is not counted in opportunity cost on this calculator."
  • Sale Closing Costs: These are the fees and expenses incurred by the seller during the finalization of a real estate transaction, paid at the closing of the sale. These costs typically include real estate agent commissions, title insurance, attorney fees, and transfer taxes. Sale Closing Costs can vary widely but often amount to 6% to 10% of the home’s sale price. Unlike purchase closing costs, these fees are typically deducted from the proceeds of the sale rather than paid upfront.
Graph showing sale closing costs impact on ownership cost. Text above the graph reads: "Sale closing costs substantially increases the monthly cost of ownership in the final year."
  • Rental Income: This is income received from roommates, renting out other units in the building you have purchased, or renting out the home once you have moved out. Rental Income further reduces the cost of homeownership, and the rate at which it grows over time can be adjusted by the user.

Benefits of Homeownership

  • Home Value Appreciation: Home value appreciation reduces the monthly cost of home ownership by increasing the equity in the property over time. As the market value of the home rises, the owner’s equity grows, which can offset the initial investment and ongoing mortgage payments, as well as maintenance costs. This appreciation can effectively lower the overall cost of ownership when considered over the long term, as the increased equity can be leveraged for favorable refinancing terms, home equity loans, or higher resale value. Additionally, as home values appreciate, the fixed costs of a mortgage become a smaller percentage of the home’s worth, further reducing the relative financial burden of monthly payments.
Graph showing cost of ownership decreasing due to home value appreciation. Text above reads: "Home value appreciation reduces the monthly cost of ownership, as owners equity is increased when the home value increases. You can change the estimated annual appreciation rate on the calculator."

Costs of Renting

While renting does not require significant one-time transaction costs like down payments and closing costs, it includes recurring costs that form the primary expenses of renting.

  • Rental Fee: The monthly amount paid to the landlord for the right to occupy the property. This payment does not build equity and is solely a cost of living.
  • Renter’s Insurance: A recurring cost that provides coverage for the tenant’s personal belongings and liability within the rental property. This insurance protects against theft, damage, and certain disasters, ensuring financial protection for the renter.
  • Upfront Cost: This includes the application fees, broker’s fees, expenses related to moving, utility setup fees, and more.
  • Rental Fee Increase: The potential increase in the rental fee over time, which can affect the overall cost of renting. Landlords may increase the rent annually or at the end of a lease term based on market conditions or other factors, impacting the long-term affordability of the rental.

If when using this calculator, the user inputs include the Rental Fee, Renter’s Insurance, Upfront Cost, and Rental Fee Increase, the rental cost would consist primarily of the monthly rental payments and insurance, with the upfront cost being a one-time initial expense and the rental fee increase affecting future costs.

Graph showing the cost of renting vs the cost of buying a home. Text above the graph reads: "The cost of renting is much more straightforward. It includes the rental fee, renters insurance, and the upfront cost of moving in. The rate at which rent increases annually can be forecasted by the user."

What to Know When Renting


Renting involves paying a landlord for residential property use, with the primary cost being the monthly rent. Other costs include security deposits, application fees, and possibly insurance. Renting is often preferred for its flexibility, especially for those with uncertain future plans.

Tips for Renters

  • Negotiate rent and lease terms to potentially lower costs.
  • Get everything in writing to protect against disputes.
  • Document the condition of the rental property upon moving in.
  • Understand federal and state laws regarding discrimination and rent increases.

Should I Consider Buying or Renting?


Financially, this decision hinges on two questions:

  1. Do I have enough savings to purchase a home?
  2. Will I live long enough in the home? Generally, the longer you plan to stay, the more financially sensible buying becomes. Our Rent vs. Buy Calculator can estimate the minimum period required for buying to be more advantageous than renting.

Factors Impacting the Decision

Major Factors:

  • Average Investment Return (AIR): This opportunity cost varies widely and should be tailored to individual circumstances.
  • Home Appreciation Rate: Research recent comparable sales in the area to estimate.
  • Mortgage Interest Rate: Input the interest rate listed on mortgage papers for accurate calculations.

Minor Factors:

  • For Buying: Property taxes, homeowners’ insurance, maintenance, repairs, HOA fees, buying and selling costs.
  • For Renting: Application fees, security deposits, renter’s insurance, rent increases.

Accurate data input into our calculators will yield the most reliable results.

The calculators found on EstateGather™ are designed to be used for informational and educational purposes only, and when used alone, do not constitute investment advice. EstateGather™ recommends that you seek the advice of a real estate professional before making any type of investment. The results presented may not reflect the actual return of your own investments. EstateGather™ is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by these tools. Furthermore, EstateGather™ is not responsible for any human or mechanical errors or omissions. You are responsible for confirming all entered information is accurate, and suitable for your usage.