How This Buy vs. Rent Calculator Works
Our buy vs. rent calculator compares the full lifetime costs of buying a home versus continuing to rent over your chosen time horizon. It models appreciation, investment growth (if you rent and invest the down payment or payment differential), maintenance, insurance, property taxes, PMI, and HOA fees.
Methodology
We use real amortization schedules to track how your mortgage balance declines. Early payments are mostly interest; over time, more goes toward principal. Accumulated equity offsets your total cost of ownership.
- Ownership Cost = Sum of all cash outflows − Equity accumulated
- Renting Cost = Sum of rents paid − Investment gains (if any)
- Breakeven Year = When cumulative ownership cost falls below cumulative rent cost
Mortgage Payment Formula
Monthly principal and interest use the standard amortization formula:
PMT = P × [r(1+r)n] / [(1+r)n − 1]
Where P = loan principal, r = monthly interest rate (annual ÷ 12), n = total number of payments.
When to Buy vs. Rent
Buying often wins if you stay long enough, benefit from appreciation, or buy below market. Renting may be better for flexibility, low upfront costs, or if you can invest aggressively elsewhere.
