FINANCIAL · RENT VS. BUY
Rent vs. Buy Calculator
Should you rent or buy a home? This calculator uses a year-by-year simulation with PMI auto-removal, home appreciation, and opportunity cost of the down payment to find the true break-even year.
Cumulative net cost over 10 years
Break-even at year 12 (beyond your 10-year horizon).
Cost breakdown
Buy
Rent
Assumptions: Nominal dollars. Buy net cost = all mortgage interest + property taxes + insurance + maintenance + HOA + closing costs − (home sale value − loan payoff − selling costs). Rent net cost = gross rent − investment growth on $92,000 invested at 5% real return (matches FIRE calc convention). Property tax assessed on appreciated home value; insurance and maintenance on purchase price. PMI at 0.85%/yr on loan balance until LTV ≤ 80%. Net sale proceeds = home value − loan payoff − selling costs ($537,566.55 − $274,599 − $37,629.66 = $225,337.63). Break-even at year 12.
About This Calculator
Should you rent or buy your next home? This calculator runs a full year-by-year simulation comparing the true net cost of buying (mortgage interest, taxes, insurance, maintenance, PMI, HOA, minus equity and selling costs) against renting (rent growth plus the investment return on your down payment). Enter your details to see the break-even year and which option wins for your planning horizon.
How It Works
Buy leg: annual costs include mortgage interest (from a full amortization schedule), property tax on the appreciated home value, homeowner's insurance, maintenance, HOA, and PMI — which automatically drops when your loan balance falls to 80% of the purchase price. Net buy cost subtracts home equity (appreciated home value minus remaining loan balance) and adds selling costs at your horizon year. Rent leg: annual rent grows each year at the specified rate. The down payment and closing costs are assumed to be invested at your real investment return rate — those gains reduce the effective rent cost (not added to the buy leg, to avoid double-counting). Break-even = the first year buying cumulative cost dips below renting cumulative cost. If that never happens within 30 years, the verdict says so.
The Formula
Buy: P&I = P × [r(1+r)^n] / [(1+r)^n − 1]; annualBuyCost = interest + propertyTax + insurance + maintenance + PMI + HOA; netBuyCost(y) = closingCosts + Σ annualBuyCost − homeEquity(y) + sellingCosts(y). Rent: annualRent(y) = rent × 12 × (1+g)^(y-1); investGains = (DP + CC) × ((1+r)^N − 1); netRentCost(y) = Σ annualRent − investGains.
Frequently Asked Questions
- Why does this calculator subtract investment gains from the rent cost?
- If you rent instead of buying, your down payment and closing costs remain available to invest. The investment growth those funds earn reduces your effective cost of renting. Subtracting it from the rent leg (rather than adding it to the buy leg) ensures it is counted once — this avoids a common double-counting bug in rent-vs-buy calculators.
- Why does the calculator include selling costs?
- If you buy and plan to sell at your planning horizon, you will pay realtor commissions and transfer taxes (typically 6–8% of sale price). Without these, short-horizon buying scenarios look artificially favorable. Enter 0% if you plan to stay indefinitely and want to ignore selling costs.
- When does PMI apply and when does it drop?
- PMI (Private Mortgage Insurance) applies when your down payment is less than 20% of the home price (loan-to-value ratio above 80%). This calculator tracks the mortgage balance month by month and automatically removes PMI the year the balance falls to 80% or less of the original purchase price — which can happen earlier than the original loan amortization timeline when home appreciation is included.
- What does "break-even year" mean?
- The break-even year is the first year in which the cumulative net cost of buying is less than the cumulative net cost of renting. Before that year, renting is cheaper on a cumulative basis; after it, buying is. If the break-even never occurs within 30 years at your inputs, the calculator says so explicitly.
- Why use a real investment return rate?
- This calculator uses a real (inflation-adjusted) return rate for the down payment investment — consistent with the FIRE calculator on this site. The default 5% matches a typical long-run US stock market real return. Home appreciation and rent growth inputs are nominal, so the comparison is in nominal dollars throughout.