How this calculator works
The real question isn't whether rent is cheaper than a mortgage payment. It's which path leaves you with more wealth. This calculator follows both paths month by month. The buyer pays the mortgage plus property tax, insurance and upkeep, and builds equity as the loan is paid down and the home rises in value. The renter pays rent and invests the money they didn't spend on a down payment, closing costs and higher monthly costs.
We assume 3% closing costs when buying and 6% selling costs when you move, since you'd only see your equity after selling.
The formula
Example calculation
A $400,000 home with 20% down at 6.5%, compared with $2,200 rent, staying 10 years:
- Mortgage payment (P&I)
- $2,022.62
- Break-even point
- Not within 10 years
- Renting comes out ahead by
- $10,451
Small changes to price growth, rent increases or how long you stay can flip the answer, so try your own numbers.
What the numbers miss
- Time is the biggest factor. Buying usually loses if you move within a few years, because buying and selling costs are high.
- Renters must actually invest. The renting path only wins if the savings are invested, not spent.
- Lifestyle matters too. Owning gives stability and control; renting gives flexibility and no surprise repair bills.
- Taxes aren't included. Mortgage interest deductions help only if you itemize.
Frequently asked questions
What is the price-to-rent ratio?
Divide the home price by a year’s rent. Above about 20 tends to favor renting; below about 15 tends to favor buying.
Is rent just throwing money away?
No. Rent buys housing, just as mortgage interest, taxes and upkeep do. Only the principal part of a mortgage payment builds wealth directly.
How long should I stay to make buying worth it?
Often five years or more, but it depends heavily on prices, rates and rents where you live.