QuietCalcsWhy monthly payment is the wrong comparison
"My mortgage would be cheaper than rent" skips the two things that decide this: the cash you sink into a purchase, and the cash you get back out. Buying front-loads a down payment plus closing costs (often 2–5% of the price), and taking the money back out later costs another 6–10% in agent commissions and fees. In between, you pay property tax, insurance, and maintenance that rent quietly bundles in.
The fair question is which path leaves you wealthier after you eventually move. That means giving the renter credit for investing the money they didn't tie up — the down payment, the closing costs, and any month the rent is lower than the cost of owning.
How this calculator compares the two
It runs your numbers month by month and tracks a single figure for each path: net worth.
- Buying: your home's value after growth, minus the mortgage still owed, minus the cost of selling — that's the equity you'd walk away with.
- Renting: the down payment and closing costs invested from day one, plus every month's savings whenever rent is cheaper than owning, all growing at your investment return.
Whichever number is higher at the year you plan to move is the financially better choice — and the calculator reports the gap in today's dollars.
The break-even year is the whole game
Because buying costs a lot to enter and exit, it almost always loses over short stays and almost always wins over long ones. The break-even year is where they cross: stay longer than that and buying builds more wealth; move sooner and renting-and-investing would have won. Your inputs move it a lot — fast-rising home prices, a low mortgage rate, or high local rents pull it earlier, while a strong stock market (a higher return on the invested down payment) or steep selling costs push it later. In the cheap-borrowing years around 2020 the break-even was famously short, closer to five years; with today's higher mortgage rates it often stretches into the eight-to-twelve-year range, which is exactly why running your own numbers beats any rule of thumb.
The 5% rule, as a quick sanity check
A back-of-envelope shortcut: add up the unrecoverable costs of owning — roughly 1% of the price for maintenance, 1% for property tax, and about 3% as the return you're giving up on the down payment — and you land near 5% of the home's value per year. If a year's rent is less than 5% of the price of a comparable home, renting tends to win; more than that, buying tends to. The calculator above is the detailed version: it adds the closing and selling costs the shortcut skips, so when the two disagree — often on shorter stays, where those one-off costs bite hardest — trust the full calculation.
What it assumes (so you can trust the number)
To keep the comparison honest rather than flattering, a few things are deliberately left out, and you can adjust for them:
- PMI isn't modeled. Put less than 20% down and most U.S. lenders add private mortgage insurance — nudge the maintenance-and-insurance figure up to approximate it.
- The mortgage-interest tax deduction isn't included. It helps buyers who itemize, so real-world buying can look slightly better than shown.
- Taxes on investment gains aren't included, which flatters the renter a little. Both simplifications are small next to the inputs you control.
Treat the result as a well-reasoned estimate to inform the decision, not a guarantee — and see the mortgage payoff calculator once you've decided to buy.
Frequently asked questions
Is it cheaper to rent or buy?
It depends almost entirely on how long you stay. Buying carries large upfront and selling costs, so renting usually wins over a few years and buying usually wins over many. This calculator finds the break-even year for your specific numbers instead of guessing.
What is the break-even point?
The number of years you need to stay for buying to leave you wealthier than renting, once you account for closing costs, selling costs, and the return you would have earned by investing the down payment instead.
Does this include the down payment's opportunity cost?
Yes. The renter is assumed to invest the down payment and closing costs from day one, plus any month that renting is cheaper than owning, all growing at the investment return you enter. That is the money buying ties up.
What does the calculator leave out?
PMI on down payments under 20%, the mortgage-interest tax deduction, and taxes on investment gains. The first two make buying look slightly better in reality; the last flatters renting slightly. All are small next to price, rent, rate, and how long you stay.
Does my information get saved?
Only in your own browser, so your inputs are still there next time. Nothing is uploaded or stored on a server.
Related calculators
Mortgage Payoff Calculator — once you buy, see what extra payments save.
Compound Interest Calculator — how the renter's invested down payment could grow.
Net Worth Calculator — track the bigger picture over time.
Inflation Calculator — what those future dollars are really worth.