Rent vs Buy Calculator

No, and the phrase hides the comparison that matters. A renter spends money on housing; a buyer spends money on interest, property tax, insurance, maintenance and transaction costs, none of which builds equity either. Only the principal portion of a mortgage payment is saving rather than spending, and in the early years of a loan that portion is small. The real question is whether the buyer's costs plus forgone investment returns come to less than the renter's costs — which is exactly what this tool computes.

Because the renter does not set it on fire. They invest it, and over a decade that compounding is substantial — an $84,000 down payment at 7% becomes roughly $165,000 in ten years. Calculators that ignore this declare buying the winner almost immediately, which is the single most common flaw in the genre. Modelling the opportunity cost is what moves the crossover point from about two years to somewhere between five and ten.

The month at which buying stops being the more expensive path. Before it, the down payment, closing costs and eventual selling costs outweigh the equity built and the rent avoided. After it, an amortising mortgage and inflating rent tip the balance the other way. It is the number that should drive the decision, because it converts an abstract argument into a concrete question: are you confident you will still be in this home then?

Because it is the cost buyers most reliably forget, and it is not small. One percent of home value per year is the usual planning figure — on a $420,000 house that is $4,200 annually, or $350 a month that a renter simply does not pay. It is lumpy rather than steady, arriving as a roof or a furnace rather than a monthly bill, which is exactly why it gets left out of mental arithmetic.

Not modelled, deliberately. It only helps if you itemise, and since the 2017 standard deduction increase the large majority of US filers do not — for them the deduction is worth nothing at all. Including it by default would flatter buying for most users. If you do itemise and it applies to you, the effect is roughly to reduce your effective mortgage rate, so you can approximate it by lowering the rate input by your marginal tax rate times the rate.