Rent vs. Buy Calculator
Compare the long-term net wealth impact of buying a home versus renting and investing the difference.
Rent vs. Buy Parameters
Financial Advantage
Monthly Cost to Buy
$3,611.61/mo
P+I+Tax+Ins+Maint
Monthly Cost to Rent
$2,500.00/mo
Rent + Ins
Estimated Home Value
$661,257
Remaining Mortgage: $361,665
Investment Portfolio
$274,803
Selling Costs (6%)
Wealth Comparison Over Time
Compares home equity growth vs. invested savings portfolio year by year.
The Opportunity Cost of Your Down Payment
When you put $100,000 down on a home, that money is locked into the property. If you rented instead, you could invest that same $100,000 in the stock market. At a 7% average annual return, $100,000 grows to about $196,000 over 10 years. This is the opportunity cost of buying — the investment returns you give up by tying up your cash in a down payment instead of the market. The Rent vs. Buy calculator factors this opportunity cost into both scenarios so you can see the true financial impact.
Unrecoverable Costs: Buying vs. Renting
Unrecoverable Costs of Buying
When you own a home, money you spend on mortgage interest, property taxes, insurance, maintenance, and closing costs is gone forever — you never get it back. Only the principal portion of your mortgage payment builds equity. On a $500,000 home with a 7% rate over 30 years, you pay over $697,000 in interest alone in the first 10 years. Add property taxes (~$6,250/yr), insurance, and maintenance (~1% of home value annually), and your unrecoverable costs can exceed $15,000 per year. These are sunk costs that reduce the net wealth benefit of homeownership.
Unrecoverable Costs of Renting
When you rent, 100% of your monthly payment is an unrecoverable cost — none of it builds equity. However, if renting is cheaper than buying, you invest the monthly difference. On a $2,500/month rental, your unrecoverable cost is $30,000/year. But if buying would cost $3,800/month, the $1,300/month difference invested at 7% grows to about $225,000 over 10 years. The key question is whether your invested savings from renting can outpace the equity you would build by buying.
Why Time Horizon Matters
Short Horizon (1-5 years)
Renting usually wins over short time horizons. Closing costs (3% of home price), selling costs (6%), and the slow equity buildup in early years mean you need to own for at least 5-7 years just to break even. On a $500,000 home, that's $45,000 in transaction costs alone. If you might move within 5 years, renting is almost always the better financial choice.
Long Horizon (10+ years)
Buying tends to win over long horizons. As years pass, your mortgage balance shrinks while home value appreciates — equity compounds. Meanwhile, rent rises with inflation, and the gap between renting and buying costs narrows. After 10-15 years, the equity built through appreciation and principal payments typically surpasses the investment portfolio from renting, making buying the wealth-building choice.