Rent vs Buy Calculator
Compare renting against buying over your time horizon.
Cash paid up front; the rest is financed.
Property tax, insurance, and maintenance per year.
First-year rent for a comparable home.
What your down payment could earn if invested instead of tied up in the home.
Closing costs now plus selling costs later, often 7 to 10% of the price in total.
Recommendation
- Buy net cost
- $124,952.48
- Rent total cost
- $183,899.09
- Savings from buying
- $58,946.61
- Mortgage interest paid
- $139,231.83
- Equity at horizon
- $202,617.80
- Home value at horizon
- $491,949.55
- Gross rental yield
- 6%
- Net rental yield
- 4.5%
Estimate over your chosen horizon. Buying is charged mortgage interest, ownership costs, transaction costs, and the investment return your cash gives up; it is credited with appreciation and the equity you build. Principal repaid is equity, not a cost.
How the rent vs buy calculator works
The tool answers two separate questions. The first is rental yield: grossYield = annualRent / value, and netYield = (annualRent − annualOpex) / totalAcqCost, where the acquisition cost is the price plus closing costs. Net yield excludes mortgage interest on purpose, because financing is a buyer decision rather than a property metric.
The second is the horizon comparison. The cost of buying is the opportunity cost of your up-front cash plus mortgage interest plus operating expenses plus closing costs plus the down payment, minus the equity you build. Equity at the horizon is your down payment plus the principal you repay plus the price appreciation, so the down payment and appreciation net out cleanly. Mortgage interest is taken from the actual amortization schedule (interest = balance·r each month), not from a shortcut formula, and only the months inside your horizon are counted. The cost of renting is the sum of annual rent over the horizon, grown each year by your rent growth rate. The lower total wins.
Worked example
A 400,000 home, 80,000 down, a 6% mortgage over 360 months, held for 7 years. Appreciation 3%/yr, operating costs 9,000/yr, closing costs 12,000, investment return 5%, comparable rent 24,000/yr growing 3%/yr.
| Item | Value |
|---|---|
| Loan principal | 320,000 |
| Mortgage interest paid (84 months) | 128,005.26 |
| Principal repaid (84 months) | 33,153.78 |
| Home value at year 7 | 491,949.55 |
| Equity at horizon | 205,103.33 |
| Opportunity cost (92,000 at 5%, 7 yr) | 37,453.24 |
| Operating costs (9,000 x 7) | 63,000 |
| Net cost of buying | 115,355.17 |
| Total rent paid | 183,899.09 |
Buying nets to 37,453.24 + 128,005.26 + 63,000 + 12,000 + 80,000 − 205,103.33 = 115,355.17. Renting totals 183,899.09. Buying saves 68,543.92 over 7 years, so the recommendation is buy.
How to use it
- Enter the purchase price and your cash down payment. The rest is financed at the mortgage rate and term you set.
- Set the horizon to how long you realistically expect to stay. This is the single biggest driver of the result.
- Use the investment return to reflect what your down payment and closing costs would earn elsewhere. Leave it at 0 to ignore opportunity cost.
- Put taxes, insurance, and maintenance into annual operating costs, and set appreciation and rent growth to conservative, separate values.
- For the yield view, enter annual rent, value, operating costs, and acquisition cost to compare properties on income alone.
Limitations
This is an estimate, not financial advice. It assumes flat annual operating costs (no inflation on upkeep), credits full equity without subtracting selling costs, ignores tax effects such as mortgage-interest deductions or capital-gains treatment, and does not model maintenance shocks, vacancy, or moving costs. Appreciation and rent growth are assumptions you supply, and small changes in them can flip the answer. Treat the output as a structured comparison, then pressure-test it with a range of inputs and a professional where the stakes are high.
Frequently asked questions
Does this calculator account for the opportunity cost of my down payment?
Yes. The cash you put down plus your closing costs are assumed to earn the investment return you enter, compounded over the horizon. That foregone growth is charged against buying. If you set the investment return to 0, the opportunity cost disappears and only the cash drains remain.
Why does buying only count mortgage interest as a cost, not the whole payment?
A mortgage payment has two parts: interest, which is money gone, and principal, which converts cash into home equity you keep. The calculator splits every scheduled payment with the same amortization engine used by the loan tools, so only the interest is treated as a cost. Principal repaid is added to your equity instead.
What is the difference between gross yield and net yield?
Gross yield is annual rent divided by the property value. Net yield subtracts annual operating expenses and divides by the all-in acquisition cost (price plus closing costs). Net yield deliberately excludes mortgage interest, because financing is a buyer's choice, not a property characteristic.
Does the comparison assume I sell the home at the end?
It credits you the full equity at the horizon (your down payment, the principal you repaid, and the price appreciation) as if you could realize it. It does not subtract selling costs such as agent commission or transfer tax. Subtract those separately if you plan to sell at the horizon.
Why did the result flip when I changed the horizon by a year or two?
Early mortgage payments are mostly interest, and appreciation and equity build slowly, so short horizons favor renting. The longer you hold, the more principal you repay and the more the home appreciates, which usually shifts the result toward buying. Try a few horizons to see where the crossover sits for your numbers.