Rent vs Buy Calculator
Compare the long-term financial outcome of renting vs buying a home with real numbers.
Enter your scenario and click "Compare Rent vs Buy" to see the full financial breakdown.
How to Use This Calculator
- Enter the home price — The median US home price in 2026 is approximately $380,000. Adjust based on your local market.
- Set your down payment — 20% avoids PMI, but many first-time buyers put down 3-10%. A smaller down payment means a larger loan and higher monthly payment.
- Add your monthly rent — Compare a similar-quality home. If you're looking at $1,800/month apartments, but a comparable home costs $2,500/month to buy, that difference matters.
- Adjust time horizon — How long do you plan to stay? The break-even year is the key number. If you plan to move before break-even, renting wins.
- Set your assumptions — Home appreciation (3% is the national long-term average), investment return (7-10% for stock market historical average), and rent increase (3% historical average) all significantly affect the outcome.
The 5% Rule: A Quick Rent vs Buy Check
A popular rule of thumb: buy if annual rent exceeds 5% of the home's purchase price.
| Home Price | 5% Annual Cost | Buy Threshold (monthly) | Rule Says |
|---|---|---|---|
| $250,000 | $12,500 | $1,042 | Buy if rent > $1,042 |
| $350,000 | $17,500 | $1,458 | Buy if rent > $1,458 |
| $500,000 | $25,000 | $2,083 | Buy if rent > $2,083 |
| $750,000 | $37,500 | $3,125 | Buy if rent > $3,125 |
| $1,000,000 | $50,000 | $4,167 | Buy if rent > $4,167 |
The 5% rule accounts for ~1% maintenance, ~1% property tax, and ~3% cost of capital (what your down payment could earn if invested). Use this as a quick sanity check, then run the calculator above with your actual numbers.
Key Factors That Shift the Rent vs Buy Decision
⏱ Time horizon
The #1 factor. Buying transaction costs (closing costs + realtor fees on sale) are 8-10% of the home's value. You need enough time for appreciation to overcome these costs. In most markets, break-even is 3-7 years.
📈 Investment alternative
The biggest variable renters often miss. If you rent and invest the down payment + monthly savings in the stock market at 7-10% returns, renting can outperform buying even over long periods.
🏡 Home appreciation
National average is 3-5%/year, but local markets vary dramatically. San Francisco and Austin had very different appreciation stories over the past decade. Use realistic local numbers in the calculator.
💰 Mortgage rates
At 3% rates, buying was a no-brainer for many. At 6.5-7% rates (2026), the monthly payment gap between buying and renting widens, and more scenarios favor renting. A 1% rate change shifts monthly payment by ~10%.
Scenarios Where Renting Beats Buying
- You plan to move within 3 years — Transaction costs (closing + selling) will almost certainly exceed any appreciation. In most cases, renting is cheaper for short stays.
- Buying costs 50%+ more than renting monthly — If comparable homes cost $3,000/month to own vs $1,800/month to rent, the renter's monthly savings invested over time can build significant wealth.
- You're in a high-cost, low-appreciation market — Some cities have high home prices that appreciate slowly. Renting and investing the difference in a diversified portfolio often wins.
- You need flexibility — Job uncertainty, potential relocation, or changing family needs all favor renting. The ability to move with minimal cost and notice is worth something.
Scenarios Where Buying Beats Renting
- You plan to stay 7+ years — This is the sweet spot. Appreciation has time to compound, and you've paid down a meaningful portion of the mortgage.
- Rent is comparable to or higher than a mortgage payment — In many Midwest and Sun Belt cities, buying costs the same or less than renting for a comparable home.
- You value stability and control — No rent increases, no landlord, no "pet fees," no lease renewals. You paint the walls whatever color you want.
- You want forced savings — A mortgage forces you to build equity every month. Many people are better at paying a mortgage than consistently investing the difference.
Frequently Asked Questions
Is it better to rent or buy a home in 2026?
The answer depends on where you live and how long you plan to stay. In expensive coastal markets (SF, NYC, LA), renting and investing the difference often wins for stays under 8-10 years. In affordable Midwest and Sun Belt markets, buying often wins within 3-5 years. With 2026 mortgage rates around 6.5%, the monthly buy vs rent gap is wider than in 2021's 3% rate era — making the calculator results more important than ever.
How long do I need to stay for buying to make sense?
The typical break-even point is 3-7 years. The key drivers are: closing costs (2-5% of price), realtor fees when selling (5-6%), and home appreciation. In expensive markets with high transaction costs, break-even can stretch to 8-10 years. Run the calculator with realistic local numbers to find your specific break-even year.
What is the 5% rule for rent vs buy?
The 5% rule: buy if annual rent exceeds 5% of the home's purchase price. For a $400,000 home, buy if rent is above $20,000/year ($1,667/month). This breaks down as ~1% maintenance, ~1% property tax, and ~3% cost of capital on the down payment. It's a useful quick check, but the calculator above provides a far more accurate analysis with your specific numbers.
Is renting really throwing money away?
No. This is a persistent myth. Renters trade equity-building for flexibility, no maintenance costs, no property tax, and the ability to invest their down payment elsewhere. The key question isn't "rent vs own" — it's "which scenario builds more net worth over my planned time horizon." In many cases, renting and investing the difference wins.
How does a mortgage payment compare to rent?
A mortgage payment includes principal (forced savings) + interest (cost of borrowing). Add property taxes, insurance, HOA, and maintenance reserve — and the true monthly cost of owning is often 20-40% higher than the mortgage payment alone. Rent covers all housing costs in one predictable number. Use our Mortgage Calculator to estimate your monthly payment, then add 1%/year for maintenance to get the real number.
What hidden costs do first-time homebuyers miss?
The top 5: (1) Closing costs — 2-5% of purchase price ($7,000-$17,500 on a $350k home). (2) Immediate repairs — $2,000-$10,000 in year one (homes never come perfect). (3) Moving costs — $1,000-$5,000. (4) New furniture/appliances — Most homes need different sizes or styles. (5) HOA fees — $200-$500/month in planned communities. Budget $15,000-$30,000 beyond the down payment.
Does buying always build more wealth than renting?
No. Historically, home appreciation averages 3-5%/year, while a diversified stock portfolio averages 7-10%/year. A renter who invests the down payment savings and monthly cost difference can build significant wealth. Buying offers leverage (a 20% down payment controls 100% of the asset) and forced savings — both powerful. But mathematically, renting + disciplined investing can win. The calculator above shows both paths side by side. For broader financial planning, check our Take-Home Pay Calculator to understand your budget, and the Renovation Cost Calculator if you're considering a fixer-upper.
Sources: Zillow, Redfin, National Association of Realtors (NAR), Freddie Mac Primary Mortgage Market Survey, S&P Case-Shiller Home Price Index, NYT Rent vs Buy methodology. All estimates are for illustrative purposes — consult a financial advisor for personalized advice.