How This Calculator Works
Our Buy vs. Rent Calculator compares the full lifetime costs of buying a home versus continuing to rent, factoring in every major cost component over the years you plan to stay.
It goes beyond simple monthly payments to model appreciation, investment growth (if you rent and invest the down payment amount or the difference between rent and mortgage payments), maintenance, insurance, taxes, PMI, and HOA fees.
We use real-world amortization schedules to track how your mortgage balance declines over time.
Early mortgage payments are mostly interest, but gradually, more of each payment goes toward principal.
This growing equity is an important offset to your total cost of ownership.
Mathematically:
- Ownership Cost = (Sum of all cash outflows) - (Equity accumulated)
- Renting Cost = (Sum of rents paid) - (Investment gains, if any)
- Breakeven Year is when cumulative ownership cost dips below cumulative rent cost.
Monthly mortgage payments are calculated using the standard amortization formula:
PMT = [r(1+r)^n] / [(1+r)^n -1],
where r is monthly interest rate and n is total number of payments.
Tips: Buying often wins if you stay long enough, benefit from appreciation, or buy below market value.
Renting may be better for flexibility, low upfront costs, or if you can invest aggressively elsewhere.
