GlenCalc

Rent vs buy calculator

Buying builds equity but costs more up front and to run; renting keeps your cash free to invest. Enter both options to compare the net cost over the time you expect to stay.

A common rule of thumb is 1% of the home’s value a year.

Your answer

Cheaper over this periodRentingBy $588.15
Net cost of buyingMoney spent minus equity on selling$165,423.92
Net cost of rentingRent minus investment growth$164,835.76
Equity after selling$173,100.59
Home value at the end$491,949.55
Total rent paid$202,289.00

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How we worked it out

Updated as you change the numbers.

  1. Buying: $338,524.51 spent over 7 years (down payment, closing, mortgage, tax, insurance, maintenance), less $173,100.59 equity after selling = $165,423.92.
  2. Renting: $202,289.00 rent, less $37,453.24 growth on the cash a renter keeps invested = $164,835.76.

Method and assumptions

For each year the calculator adds up what each choice costs. The buyer pays the down payment and closing costs, the mortgage, property tax, insurance and maintenance, and at the end sells, keeping the home’s value less selling costs and the remaining loan. The renter pays rent that rises each year and invests the cash a buyer would have put down. The result is a simplified comparison: it ignores tax effects such as the mortgage interest deduction.

Questions

How long do you need to stay for buying to beat renting?

Often around five years or more, because closing and selling costs take time to recover. It depends heavily on prices, rents and rates where you live.

Sources

Method and figures checked on . Every worked answer on this page is covered by an automated test. Found a mistake? Tell us.

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