How to use it
- Type the Purchase price of the home, the Down payment and the Mortgage interest rate per year, %, with the Loan term, years; use 0% if there is no loan.
- Type the costs: Costs of buying, % of the price, Yearly costs of owning, % of the home's value and Costs of selling, % of the sale price.
- Type the Monthly rent of a similar home, the Expected rent increase per year, %, the Return on money you invest instead, % per year and the Years to compare.
- Read Buying minus renting, at the end and the Break-even year, then the chart and the year-by-year table.
How the two positions are calculated
Both choices start with the same cash: the down payment and the costs of buying. The buyer spends it on the home; the renter keeps it invested. Each month the buyer pays the mortgage and the yearly costs of the home, and the renter pays the rent and invests the difference. The mortgage payment is the level payment that repays the loan over its term; it is the inverse of the present value of an annuity (Wikipedia, "Present value").
At the end of a year, the net position of buying is the home's value after selling costs, less the loan still owed. The net position of renting is the money invested. Both are compared at the end of the years you choose, and the break-even year is the first year from which buying stays ahead to the end.
Monthly payment = loan × i ÷ (1 − (1 + i)^(−n)), i = yearly rate ÷ 12, n = months
Net position of buying = home value × (1 − selling costs) − loan balance
Net position of renting = invested money, growing at (1 + return)^(1/12) − 1 a month
Monthly invested by the renter = buyer's payment and yearly costs − rentWhy the costs of owning count, and the return of the money
Wikipedia's article on imputed rent describes the user cost approach, which counts the unrecoverable ownership costs of a home against what the owner could have earned on the money tied up in it. That is why the interest, the yearly costs and the costs of buying and selling are all in the calculation.
Money put into a home is not free: its opportunity cost is the value of the best alternative given up (Wikipedia, "Opportunity cost"). The return you enter for money invested instead is that alternative, so the choice between the two positions depends on it.
What this calculator does not include
- Taxes on rent or on the gain from the home, deductions for interest, and any tax on the money invested.
- A home that you cannot sell at the price assumed, or a mortgage with a rate that changes over time. Use one rate and one price growth for the whole period.
- Moving costs, furnishing, insurance that differs by renter or owner, and the non-money value of living in one home rather than the other.
Worked example: a 300,000 home, 60,000 down, 4.5% over 20 years, rent 1,200
The loan is 240,000. The monthly payment is 1,518.36, so the buyer's monthly outgoing in year 1 is 1,768.36 with the yearly costs of 1%. The renter pays 1,200 and invests the difference of 568.36 a month, with the 60,000 down payment and the 9,000 costs of buying (3%) at the start: 69,000 in all.
After 10 years the home is worth 403,174.91 and the loan still owed is 146,505.39. After selling costs of 5% of the home's value, buying leaves 236,510.78. Renting leaves 176,612.39 invested, so buying is ahead by 59,898.39. Renting is ahead in years 1 to 4; buying stays ahead from year 5 to year 10.
| Year | Buying | Renting |
|---|---|---|
| 1 | 61,125.28 | 80,145.89 |
| 4 | 113,223.84 | 113,577.83 |
| 5 | 131,913.13 | 124,597.43 |
| 10 | 236,510.78 | 176,612.39 |
Frequently asked questions
Is buying a home always better in the long run?
No. It depends on the price growth, the rents, the costs and the return on the money you would invest. With weak price growth or high costs, renting can stay ahead for the whole period.
Why does a rent-or-buy result change so much with the return rate?
The return rate is what the renter's money earns. A higher return makes renting stronger, because the money not put into the home grows faster; a lower return makes buying look better.
Does the calculator count the mortgage interest as a cost?
Yes. The monthly payment includes the interest, and the loan balance falls only by the principal part, so the interest is paid out of the buyer's outgoings.
What is the break-even year?
It is the first year from which buying stays ahead of renting until the last year you chose. If renting is ahead at the end, the calculator says there is no break-even year.
Are the example figures real prices or rates?
No. They are examples to show how the calculation works. Use your own mortgage offer, the rents and prices in your area, and your own return and growth assumptions.
Is my data sent to a server?
No. The calculation runs in your browser, and nothing you enter is sent to us.
Sources
- Wikipedia: Present value (annuity formula for the monthly payment)
- Wikipedia: Imputed rent (the user cost approach to owning a home)
- Wikipedia: Opportunity cost (the best alternative given up)
Figures and text last checked on Tuesday, November 10, 2026.