Rent vs. Buy Calculator (Total Cost Over Time, Net of Opportunity Cost)

The rent-versus-buy question is usually asked as if it has a permanent answer: which one is "better." It doesn't. The answer depends almost entirely on how long you'll stay, because buying carries large upfront and back-end transaction costs (closing costs going in, agent commission coming out) that renting doesn't, and those costs only get diluted over time as you build equity and the home appreciates.

This calculator runs the full comparison: monthly cost of owning (principal, interest, property tax, maintenance, insurance) against monthly cost of renting (rent plus renters insurance, with rent growing annually), then nets out what you'd actually walk away with if you sold the home at your chosen horizon, minus what your down payment and closing costs would have earned if invested in the market instead of tied up in home equity. That last piece, the opportunity cost of the down payment, is the step most back-of-envelope rent-vs-buy comparisons skip, and it can be large: a $76,000 down payment invested at a real market return compounds meaningfully over a 5-to-10-year horizon.

Buying, total cash outflow over the horizon:

$$\text{Cash Outflows} = \text{Down Payment} + \text{Closing Costs} + \sum(\text{P\&I} + \text{Property Tax} + \text{Maintenance} + \text{Insurance})$$

Buying, net proceeds if sold at the horizon:

$$\text{Net Sale Proceeds} = \text{Home Value}_{\text{horizon}} \times (1 - \text{Selling Cost \%}) - \text{Remaining Loan Balance}_{\text{horizon}}$$

$$\text{Home Value}_{\text{horizon}} = \text{Home Price} \times (1 + \text{Appreciation Rate})^{\text{Years}}$$

Buying, opportunity cost of the down payment (what it would have earned if invested instead, solved with the platform's TVM future-value function):

$$\text{Opportunity Cost} = \left[(\text{Down Payment} + \text{Closing Costs}) \times (1 + \text{Investment Return})^{\text{Years}}\right] - (\text{Down Payment} + \text{Closing Costs})$$

Net cost of buying:

$$\text{Net Cost of Buying} = \text{Cash Outflows} - \text{Net Sale Proceeds} + \text{Opportunity Cost}$$

Renting, total cost over the horizon (rent compounding annually at the assumed growth rate):

$$\text{Net Cost of Renting} = \sum_{y=0}^{\text{Years}-1} \text{Monthly Rent} \times (1+\text{Rent Growth})^{y} \times 12 \;+\; \text{Renters Insurance} \times \text{Months}$$

Comparison:

$$\text{Buying Advantage} = \text{Net Cost of Renting} - \text{Net Cost of Buying}$$

A positive result means buying is cheaper over that horizon; negative means renting is cheaper.

At a 1-year horizon, using $300,000 home price, 20% down, 6% APR, 30-year term, 1.2% property tax, $100/mo insurance, 1% maintenance, 3% appreciation, 3% closing costs, 7% selling costs, $1,800/mo rent, 3% rent growth, $15/mo renters insurance, and a 5% investment return:

1. Down payment: $300,000 × 20% = $60,000.00. Closing costs: $300,000 × 3% = $9,000.00. Total upfront cash: $69,000.00.
2. Monthly P&I on the $240,000 loan at 6% over 360 months: $1,438.92. Adding $300 property tax, $250 maintenance, and $100 insurance gives a total monthly owning cost of $2,088.92.
3. Over 1 year: $69,000 upfront + $17,267.04 in P&I + $3,600 tax + $3,000 maintenance + $1,200 insurance = $94,067.04 in cash outflows.
4. Home value after 1 year: $300,000 × 1.03 = $309,000.00. Remaining loan balance after 12 payments: $237,052.77. Net sale proceeds: $309,000 × 93% − $237,052.77 = $50,317.23.
5. Opportunity cost of the $69,000 upfront cash at 5% for 1 year: $69,000 × 1.05 − $69,000 = $3,450.00.
6. Net cost of buying: $94,067.04 − $50,317.23 + $3,450.00 = $47,199.81.
7. Net cost of renting: ($1,800 × 12) + ($15 × 12) = $21,600.00 + $180.00 = $21,780.00.
8. Buying advantage: $21,780.00 − $47,199.81 = −$25,419.81. At just 1 year, renting is roughly $25,400 cheaper, almost entirely because the $9,000 in closing costs and the transaction cost baked into "selling costs" haven't had time to be offset by equity buildup and appreciation.

Run the same inputs at a 7- or 10-year horizon and the picture typically reverses, since the fixed transaction costs stay the same in dollar terms while equity paid down and home appreciation both keep compounding.

A down payment isn't free money you're "saving" by putting it into a house; it's capital that stops earning a market return the moment it becomes home equity instead. If that $69,000 down payment plus closing costs would otherwise sit in a diversified investment account earning something like 7% a year, ten years of that foregone growth is a real cost of buying, even though no check is ever written for it. This calculator's opportunity-cost term is what makes the comparison apples-to-apples with renting, where that same capital could stay invested the whole time.

• Mortgage interest and property tax deductibility. For itemizing filers, a portion of mortgage interest and property tax may be deductible, improving buying's after-tax economics; this calculator works in pre-tax dollars.
• PMI for down payments under 20%. Private mortgage insurance is not modeled; a smaller down payment than 20% will understate buying's true monthly cost.
• Rent control, lease renewal risk, or landlord-initiated non-renewal. Renting assumes you can find comparable housing at the modeled rent growth rate for the full horizon, which isn't guaranteed in every market.
• Refinancing. The mortgage rate and term are held fixed for the full horizon; a future refinance at a lower rate isn't modeled.
• Reassessment of property tax. Property tax is calculated on the original purchase price throughout, not on the appreciated value, which understates the real trajectory in many jurisdictions that reassess periodically.
• Lifestyle and non-financial factors. Stability, control over the property, and neighborhood permanence carry real value for many households that a pure cost comparison doesn't capture.

• Comparing monthly payment to monthly rent directly, ignoring the horizon. A lower monthly payment than rent doesn't mean buying wins; the upfront and back-end transaction costs can outweigh years of modest monthly savings if you don't stay long enough.
• Ignoring the opportunity cost of the down payment entirely. This is the single most commonly skipped factor in casual rent-vs-buy comparisons, and it can be tens of thousands of dollars over a multi-year horizon.
• Assuming home appreciation is guaranteed. Historical average appreciation is a reasonable planning assumption, not a promise; a market downturn during your specific horizon changes the comparison substantially.
• Underestimating maintenance costs. The 1% of home value per year rule of thumb is a reasonable average, but older homes, larger homes, and homes with major systems (roof, HVAC) nearing end-of-life can run well above that.
• Using a horizon shorter than you actually expect to stay, "just to be conservative." This systematically biases the comparison toward renting, since transaction costs dominate short horizons; use your honestly-expected time horizon, not an artificially short one.

• National Association of Realtors: Profile of Home Buyers and Sellers, median homeowner tenure data.
• Freddie Mac: Primary Mortgage Market Survey, historical 30-year fixed mortgage rate data.
• S&P CoreLogic Case-Shiller Home Price Indices and Federal Housing Finance Agency House Price Index, for long-run home appreciation benchmarks.
• Consumer Financial Protection Bureau: guidance on closing costs and the true cost of homeownership beyond principal and interest.