How This Calculation Works
The rent vs buy calculator compares the total cost of renting versus buying over a set time period. For renting, it projects monthly rent with annual increases. For buying, it factors in mortgage payments, property taxes, insurance, maintenance, and home appreciation.
The opportunity cost of the down payment is also considered — money used for a down payment could otherwise be invested in the stock market. The calculator shows the break-even point where buying becomes cheaper than renting.
Common Mistakes to Avoid
- Ignoring hidden costs of ownership. Property taxes, insurance, HOA fees, and maintenance add 1–3% of the home's value per year.
- Assuming appreciation is guaranteed. Home values can decline. Use conservative estimates (2–3% per year).
- Forgetting opportunity cost. A $60,000 down payment invested at 7% would grow to $118,000 in 10 years.
Worked Example
Scenario: $1,800/month rent vs a $350,000 home with 20% down, 6.5% mortgage rate, over 7 years.
Renting: $1,800 × 12 × 7 = $151,200 (before rent increases).
Buying: $280,000 mortgage at 6.5% = $1,769/month + taxes/insurance ≈ $2,300/month total, but building equity.