How does this calculator work?
This tool calculates the true total cost of renting versus buying over your chosen time horizon — not just the monthly payment. Buying a home involves many costs beyond the mortgage: property taxes, insurance, maintenance, and closing costs. Renting has costs too, plus the opportunity cost of not owning. This calculator accounts for all of them.
What is included in the buying cost?
- Mortgage payments (principal + interest over your time horizon)
- Down payment — capital you take out of savings or investments
- Property tax — typically 1–2% of home value per year
- Maintenance and repairs — the 1% rule estimates 1% of home value per year
- Closing costs — approximately 3% on purchase, 6% on sale (agent fees etc.)
- Opportunity cost — what your down payment would have earned if invested instead
Against this, we subtract the equity you build through mortgage repayment and home appreciation, giving you the true net cost of buying.
What is included in the renting cost?
- Monthly rent with annual increases applied each year
- Renters insurance
Renting has no equity building — but the money you would have spent on a down payment remains liquid and can be invested, which is reflected in the opportunity cost calculation on the buying side.
When does buying make more sense?
Buying generally wins when you plan to stay for 5 or more years, when the price-to-rent ratio in your area is low, when mortgage rates are low relative to rent levels, and when you have a solid down payment ready. The longer you stay, the more equity you build and the more the fixed mortgage payment works in your favour as rents rise around you.
When does renting make more sense?
Renting wins when you might move within a few years, when home prices are very high relative to rents (price-to-rent ratio above 20), when you do not have a substantial down payment, or when your local market has slow appreciation. It also preserves flexibility — a valuable asset in an unpredictable career or life situation.
What is the price-to-rent ratio?
The price-to-rent ratio divides the home price by the annual rent for a comparable property. A ratio below 15 generally favours buying. Between 15 and 20 is a grey area. Above 20 typically favours renting. In expensive cities like San Francisco or London, this ratio regularly exceeds 30, meaning the math strongly favours renting unless you plan to stay for many years.
Common rent vs buy questions this calculator answers
People approach this decision from many angles: is it better to rent or buy right now, should I buy a house or keep renting, when does buying a house make sense, renting vs buying pros and cons. The honest answer is always: it depends on your numbers.
The most important factor is how long you plan to stay. Buying has high upfront costs — closing costs, down payment, moving expenses — that take years to recoup through equity and appreciation. If you move in 2 years, renting almost always wins. If you stay 10 years, buying almost always wins. The break-even point shown in this calculator is the exact year where buying becomes cheaper than renting for your specific situation.
Other factors that tip the scales: price-to-rent ratio (home price divided by annual rent — below 15 favours buying, above 20 favours renting), local home appreciation rate, and whether you have a strong down payment ready. In expensive cities like San Francisco, New York, or London, renting often makes more financial sense even for long-term residents.