How to use this calculator
- Enter the home price, down payment, interest rate, and loan term you're considering, along with the monthly rent for a comparable home.
- Set how many years you want to compare — anywhere from 1 to 30.
- Open Advanced to refine buying costs (closing costs, selling costs, property tax, insurance, maintenance, HOA, appreciation, and PMI if you're putting down under 20%) and renting costs (renters insurance, rent increases), plus the return you'd expect on money you invest instead of spending it on housing.
- Optionally turn on the mortgage-interest tax deduction if you expect to itemize — most filers take the standard deduction instead, so it's off by default.
- Review the net worth chart, the crossover year (when buying's net worth catches up to renting's), and the year-by-year table.
How it's calculated
Each year, buying and renting are compared on equal footing: whichever side's total cash outlay is lower that year has the difference invested, so both scenarios end up spending the same total amount — the only thing that differs is how much of it becomes wealth versus rent paid to a landlord.
Buyer net worth = current home value − remaining mortgage balance − estimated selling costs (as if sold that year). The mortgage is amortized month by month at your rate and term; property tax and maintenance are calculated as a percent of the home's value at the start of each year, since assessments and upkeep needs track a home's value over time.
PMI (private mortgage insurance) is added to the buying cost whenever the down payment is under 20%, using the same rule as the Mortgage calculator: it's charged on the loan amount at the rate you enter, and stops automatically once the original payment schedule is first due to reach 78% of the home's original value (or the loan's midpoint, if sooner) — extra payments aren't modeled here, so this reflects the original schedule only.
Renter net worth = an invested portfolio. It starts with what the buyer paid upfront and the renter didn't — the down payment plus closing costs — invested on day one. Each year after that, the difference between that year's buying cost and renting cost is added to (or, if renting cost more that year, subtracted from) the portfolio, which otherwise grows at your assumed investment return.
The crossover year is the first year buyer net worth is at or above renter net worth. If it never happens within your horizon, that means renting and investing the difference is projected to stay ahead for as long as you compared.
"Total cost" for each side is the plain cash paid out over the horizon (buyer: down payment + closing costs + all housing payments; renter: all rent + renters insurance) — it isn't the same as net worth, since it doesn't subtract what you'd get back from selling a home or credit for an investment portfolio.
Assumptions
- Property tax and maintenance scale with the home's value each year (based on the value at the start of that year); homeowners insurance, HOA dues, and renters insurance are flat dollar amounts that don't grow on their own.
- Rent increases once a year, by the percentage you set; home value appreciates once a year the same way.
- The mortgage rate is fixed for the full term; adjustable-rate loans and refinancing aren't modeled.
- The mortgage-interest tax deduction is off by default because most filers take the standard deduction and see no marginal benefit from mortgage interest. When it's on, the benefit is only the amount your mortgage interest plus any other itemized deductions you enter (SALT, charitable giving, etc.) exceeds your standard deduction for the filing status you pick — not the full interest paid — since itemizing only helps once your total itemized deductions clear the standard deduction. Mortgage interest above $750,000 of acquisition debt isn't deductible (26 U.S.C. §163(h)(3)(F)); the calculator prorates the deductible share when your loan exceeds that.
- "Selling costs" (typically agent commissions and closing costs, often 6–10% of the sale price) are subtracted from every year's buyer net worth, as if you sold that year — this is a standard way to make the comparison fair, not a claim that you're planning to sell.
- Results are estimates for comparing scenarios, not a prediction of actual future home prices, rents, or investment returns, all of which are uncertain.
Frequently asked questions
Is it better to rent or buy a home?
It depends on how long you'll stay, local home prices relative to rent, your down payment, and what you'd otherwise do with the money you're not spending on housing. This calculator runs the numbers for your specific situation instead of relying on a rule of thumb, and shows a crossover year — the point (if any) where buying's net worth catches up to renting's.
What does the 'crossover year' mean?
It's the first year in the projection where the buyer's net worth (home equity minus estimated selling costs) is at least as high as the renter's invested portfolio. Before that year, renting and investing the difference is ahead; after it, buying is ahead. A null crossover means buying hasn't caught up within the years you compared.
Why does the renter's portfolio include the down payment and closing costs?
Because that cash is the buyer's, not the renter's — the renter keeps it and can invest it instead. Starting the renter's portfolio with that amount is what makes the two scenarios comparable: both start with the same total resources, one converts them into a home, the other invests them.
How is 'whichever side pays less is invested' calculated?
Every year, the calculator compares that year's total buying cost (mortgage payment, property tax, insurance, maintenance, HOA, minus any tax savings) to that year's total renting cost (rent plus renters insurance). The renter's portfolio receives that difference — a positive amount if buying cost more (renting is relatively cheaper that year), or a negative adjustment if renting cost more (buying was relatively cheaper). This keeps total spending equal between the two scenarios.
Does this calculator include the mortgage interest deduction?
Only if you turn it on. It's off by default because the Tax Cuts and Jobs Act nearly doubled the standard deduction, and most homeowners no longer itemize — meaning mortgage interest provides no additional federal tax benefit for them. When it's on, the benefit is only the amount by which your mortgage interest plus other itemized deductions exceed your standard deduction, using your filing status's standard deduction amount — not simply your tax rate times the full interest paid. Check your own situation, and this calculator's simplified math, against a tax professional before assuming a tax benefit.
How much do closing costs and selling costs matter?
A lot, especially over shorter horizons. Closing costs (often 2–5% of the loan) are a sunk cost the moment you buy, and selling costs (commonly 6–10% of the sale price) reduce what you'd walk away with if you sold. Together they're a big part of why buying often needs several years to catch up to renting, even when home values are rising.
What if I don't know what rent increase or appreciation rate to use?
Check recent local data — a metro-area rent index or your own rent history for rent growth, and recent home-price trends (e.g. a regional Case-Shiller or FHFA index) for appreciation — rather than a national average, since both vary a lot by city. When unsure, try a few reasonable values and see how sensitive the crossover year is.
Does this calculator include PMI (private mortgage insurance)?
Yes, if you enter a PMI rate under Advanced and your down payment is under 20%. It's charged on the loan amount at the rate you enter and, like the Mortgage calculator, stops automatically once the original amortization schedule is first due to reach 78% of the home's original value (or the loan's midpoint, if sooner) — the same rule the Homeowners Protection Act sets for conventional loans. At 20% down or more, PMI is $0.
Does a bigger down payment always favor buying?
It reduces your mortgage balance and interest, but it also means more cash tied up in the home instead of invested, so it doesn't automatically favor either side. Try changing the down payment and see how it shifts your net worth and crossover year.
Why might renting still look better even though I'm 'throwing money away' on rent?
Rent isn't the only comparison — buying has its own costs that don't build equity: interest, property tax, insurance, maintenance, HOA dues, and transaction costs. If the money you'd otherwise put toward those costs and a down payment earns a strong investment return, renting can come out ahead, especially over shorter horizons or in expensive housing markets.
Should I use this instead of talking to a financial advisor?
No — this calculator is a planning tool to compare scenarios, not personalized financial advice. Your own tax situation, job stability, lifestyle plans, and local market all matter and are worth discussing with a qualified professional before a decision this size.
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Disclaimer: This calculator provides estimates for educational purposes only and is not financial, tax, or legal advice or an offer of credit. Actual payments depend on your lender, loan terms, taxes, and insurance. Consult a qualified professional before making financial decisions.