Rent vs. Buy Calculator
Enter your rent, home price, and financial details to see which option costs less — and exactly when buying breaks even with renting.
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opportunity cost of down payment
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Send Money NowHow the Rent vs. Buy Decision Really Works
The rent vs. buy decision is not simply about monthly payment — it's about total cost over your actual time horizon. Buying has large upfront costs (down payment, closing costs of 2–5%) and ongoing costs (taxes, insurance, maintenance). Renting has lower upfront costs but no equity building and rent subject to annual increases. The key variable is time: the longer you stay, the more buying tends to win. The shorter your horizon, the more renting tends to win.
What Is the Break-Even Point?
The break-even point is the year at which buying's cumulative net cost (all payments minus equity built plus opportunity cost of the down payment) falls below renting's cumulative cost. Before that point, renting is cheaper on a net basis. After it, buying is cheaper. In most US markets, the break-even point falls between 4 and 8 years. If you plan to move before break-even, renting is likely the better financial choice.
The Opportunity Cost of a Down Payment
A down payment of $80,000 invested in a diversified index fund at 7% annual return grows to over $160,000 in 10 years. That growth you give up when you put money into a house instead of the market is called opportunity cost — and it's one reason buying isn't automatically better than renting even when monthly mortgage payments are similar to rent. Our calculator factors this in so you see the honest comparison.
The 5% Rule for Rent vs. Buy
A useful heuristic: multiply the home price by 5%, then divide by 12. If your annual rent is less than 5% of the home price, renting is likely more cost-effective. Example: $400,000 home × 5% = $20,000/year = $1,667/month. If rent is under $1,667, renting may be the better deal. This rule accounts for property taxes (~1%), maintenance (~1%), and the cost of capital tied up in the home (~3%).