Rent vs Buy Calculator – Is It Cheaper to Own or Rent?

Rents are high, but so are home prices and mortgage rates. That makes the rent versus buy decision much less obvious than it used to be. This rent vs buy calculator helps you compare the long-term cost of renting and buying by looking at your monthly payments, upfront costs, home equity, and what could happen if you invested your cash instead of using it for a down payment.

How the rent vs buy calculator works

The HonestCredit rent vs buy calculator is designed to capture the key financial trade-offs between renting and owning in a clear, mobile-friendly layout. It simulates your housing costs month by month and then compares the net cost of renting and buying over the time horizon you choose, after accounting for home equity and invested savings. Results update automatically as you change your numbers.

On the buying side, the calculator uses:

• Home price and down payment to calculate your loan amount.
• Mortgage interest rate and term to compute a fixed principal and interest payment using the standard amortization formula (similar to Excel’s PMT function).
• Property tax rate, homeowners insurance, and HOA dues to estimate ongoing ownership costs.
• Maintenance as a percentage of the home’s value per year, to approximate repairs and upkeep.
• Buying and selling closing costs as percentages of the purchase and future sale price (for lender fees, title charges, and real-estate commissions).
• An annual home price growth assumption so you can see how appreciation might affect your future equity and sale proceeds.

On the renting side, the calculator includes:

• Your starting monthly rent.
• An annual rent increase percentage to model rising rents over time.
• Renter’s insurance as a smaller, ongoing protection cost.
• A security deposit, expressed as a multiple of one month of rent.

To capture the opportunity cost of buying versus renting, the calculator assumes:

• If you keep renting, you invest your would-be down payment and buying closing costs instead of tying them up in home equity.
• Whenever renting is cheaper per month than owning, you invest the monthly savings.
• Those invested amounts grow at the annual return rate you enter (for example, a diversified stock and bond portfolio).

For both renting and buying, the calculator tracks cash flows over every month in your time horizon. At the end of the period, it compares:

• Total cash out of pocket to own, minus your estimated home equity after selling (net cost of buying).
• Total cash out of pocket to rent, minus your projected investment balance (net cost of renting).
• Average monthly cost for each option, based on those net costs.
• An estimated “break-even horizon” where buying becomes cheaper than renting, if that happens within 30 years.

What the calculator actually compares: net cost and “advantage”

To make the results easier to interpret, it helps to think in terms of net cost and advantage. Instead of looking only at your monthly payment, the calculator compares how much wealth you end up with after a given number of years under each option.

For each scenario, the calculator computes:

• Net cost of buying: your total housing cash outflows as a homeowner, minus your estimated home equity after selling at the end of the period.
• Net cost of renting: your total rent and related cash outflows, minus your projected investment balance if you invest your down payment, closing costs, and any monthly savings from renting.

A positive net cost means that option leaves you with a net out-of-pocket cost over the period. A negative net cost means that, after accounting for equity or investments, you actually end up ahead in net terms. To make the comparison more intuitive, the calculator also shows an “Estimated advantage of renting” or “Estimated advantage of buying”, depending on which side comes out better.

When the summary says, for example, that there is an “estimated advantage of renting” of a certain dollar amount, that figure represents how much better renting and investing comes out compared with buying over your chosen time horizon, based on your assumptions.

Average monthly cost vs average monthly advantage

Because net cost is calculated over your whole time horizon, the calculator also expresses the result as an average monthly figure. On the buying side, you will typically see an “Average monthly cost – buying”, which turns the net cost into a monthly equivalent. On the renting side, the calculator may show an “Average monthly advantage of renting” when renting comes out ahead, or an “Average monthly cost – renting” when renting is the more expensive option in net terms.

If the advantage is positive, renting leaves you ahead by that amount per month on average. If buying comes out ahead in your scenario, the summary will instead highlight the estimated advantage of buying over renting.

Upfront costs: down payment, closing costs, and deposits

Buying a home generally requires far more cash on day one than renting. The calculator models:

• Down payment – a percentage of the home price that becomes immediate equity.
• Buying closing costs – a percentage of the purchase price for lender fees, title charges, and other transaction costs.
• Selling closing costs – a percentage of the future sale price to reflect real-estate commissions and related fees when you sell.

By contrast, renting usually only requires:

• First month’s rent (and sometimes last month’s rent).
• A security deposit, often equal to one month of rent.

The calculator shows the total upfront cash needed for each option so you can quickly see whether buying is even realistic given your savings.

Ongoing ownership costs: mortgage, taxes, insurance, maintenance, HOA

When you buy, your monthly housing cost is more than just the mortgage payment. The calculator includes:

• Principal and interest – the fixed mortgage payment based on your loan amount, interest rate, and term.
• Property taxes – an annual percentage of your home’s value, spread across 12 months.
• Homeowners insurance – an annual premium, also spread across the year.
• Maintenance – a percentage of your home’s value per year, to reflect repairs and wear-and-tear.
• HOA dues – monthly fees if your home is part of a homeowners association.

These costs can be substantial, especially in markets where property taxes or insurance have climbed faster than rent. In many areas, a mortgage that looks affordable on paper becomes much tighter once taxes, insurance, and HOA dues are included.

Ongoing renting costs: rent, increases, and renter’s insurance

On the renting side, the calculator focuses on:

• Monthly rent at the start of your lease.
• Annual rent increases, which you set as a percentage each year.
• Renter’s insurance, which is typically inexpensive but still worth including.

Rising rents can slowly erode the advantage of renting. But in many markets as of 2025, higher mortgage rates and ownership costs mean it can still be cheaper to rent for several years, especially if you invest the difference.

Equity versus investing: opportunity cost

The most important conceptual piece is how the calculator treats equity and investing. As a homeowner, you build equity through both principal paydown and potential home price appreciation. As a renter, you do not build home equity, but you keep your cash flexible and can invest it elsewhere.

The calculator simplifies this trade-off by:

• Treating your down payment and buying closing costs as an investment account if you decide to keep renting instead of buying.
• Adding any monthly “renting is cheaper” difference to that investment account.
• Growing that account at the expected investment return you choose.
• Comparing your ending home equity (if you buy) with your ending investment balance (if you rent and invest).

Your final result is based on net cost: total out-of-pocket costs minus your accumulated equity or investments. That makes it easier to see whether buying or renting leaves you better off financially after your chosen number of years, and how big the estimated advantage of one option is over the other.

How to use the rent vs buy calculator step by step

You do not need to obsess over every detail to get value from the calculator. Here is a simple way to use it:

1. Enter a realistic home price and down payment. Start with homes you are actually seeing in your area and the down payment you could reasonably fund within the next year or two.
2. Set your mortgage rate and term. Use current quotes or pre-approval offers for your rate, and choose a term such as 30 years or 15 years.
3. Add property taxes, insurance, maintenance, and HOA dues. Use real numbers where available (from listings or tax records). If not, use conservative estimates based on local norms.
4. Enter your current or expected rent and renter’s insurance. Add an annual rent increase percentage based on local trends or your lease history.
5. Choose a time horizon. Ask how long you realistically plan to stay in the area and in one home. Five to ten years is common for this type of analysis, but you can test shorter or longer scenarios.
6. Pick an investment return assumption. Use a rate that reflects a diversified, long-term portfolio after inflation, not an aggressive single-stock bet.
7. Review the summary results. As you adjust your inputs, the calculator automatically updates the net cost of renting and buying, the estimated advantage of one option over the other, and the average monthly cost or advantage figures.
8. Stress-test the result. Adjust one assumption at a time (home prices, rent growth, investment returns) to see how sensitive the outcome is. Focus on what happens under more conservative assumptions, not just best-case scenarios.

Key assumptions and limitations

No calculator can perfectly predict the future. This tool gives you a structured way to compare scenarios, but there are important limitations:

• Home price appreciation may be higher or lower than you expect and can vary widely by city and neighborhood.
• Rent growth can be volatile. In some markets, rents have flattened or even fallen, while in others they keep climbing faster than incomes.
• Investment returns are uncertain. Actual stock and bond performance may be weaker than your assumption for long stretches.
• Property taxes, insurance, and maintenance can increase faster than general inflation, especially in areas facing higher climate or insurance risks.
• The calculator does not model detailed income tax effects, such as mortgage interest or property tax deductions, or capital gains exclusions when selling a primary residence.

Because the math has shifted in many high-cost markets, experts increasingly emphasize longer holding periods for buyers to break even financially compared with renting. In some cities, homeowners may need to stay seven to nine years or more before buying clearly beats renting on a purely financial basis.

Beyond the numbers: questions to ask before you buy

Even the best rent vs buy calculator cannot capture everything that matters. After you explore the numbers, it is worth asking a few bigger-picture questions:

• How stable are my job, income, and family plans over the next five to ten years?
• Am I comfortable taking on the responsibility and unpredictable costs of home maintenance and repairs?
• Do I value the flexibility to move for work, family, or lifestyle reasons more than the stability of owning?
• Would a higher mortgage payment crowd out other priorities, such as retirement savings, emergency funds, or paying down other debt?
• If I buy, am I mentally prepared for the possibility that home prices could stagnate or fall for several years?

In general, buying tends to make more sense when you are financially ready, plan to stay put for a longer period, and can comfortably handle the full cost of ownership. Renting tends to be better when you need flexibility, are still building savings, or are unsure where you want to live long term.

Once you have tested your rent versus buy scenarios, you can use other HonestCredit tools, such as a mortgage payment calculator and a home affordability calculator, to refine your price range and see how a potential purchase fits within your budget and debt-to-income limits.