Why does this calculator sometimes favor renting when others favor buying?

Because it counts the opportunity cost of the money tied up in the house. A down payment and closing costs could otherwise be invested and compound for the whole period; most simple calculators ignore those foregone gains, which quietly flatters buying. Include them and close calls often flip — which is exactly why this line is on the chart.

What exactly is the opportunity cost of a down payment?

It's the investment growth that money would have produced somewhere else. $92,000 of down payment and closing costs invested at 7% for ten years would grow by roughly $89,000 — gains a buyer gives up by putting the money into a house instead. The house may appreciate too, of course; the comparison nets the two against each other.

How long do you need to stay for buying to win?

There's no universal number — it depends on the rent-to-price ratio in your market, mortgage rates, and what your alternatives earn. Buying carries heavy one-time costs (closing costs both ways), so short stays usually favor renting; extend the horizon slider and watch for the crossover year. In many realistic scenarios it lands somewhere between 5 and 15 years, and in expensive coastal markets it may never arrive.

Does this include the mortgage-interest tax deduction?

No. Since the standard deduction roughly doubled in 2018, most households no longer itemize, so the deduction is worth $0 to them. If you would itemize, buying looks somewhat better than shown here — that simplification, like PMI and reinvested monthly savings, is listed plainly in the model notes.

Rent vs. Buy Calculator

The true multi-year cost of each path, side by side — including what your down payment would earn if it stayed invested.

Monthly rent today ($)

Home price ($)

Down payment (%)

Mortgage rate (%)

Mortgage term (years)

Years to compare

Assumptions — editable estimates, not predictions

Annual rent increase (%)

Home appreciation (%/yr)

Investment return (%/yr)

Property tax (%/yr of value)

Maintenance + insurance (%/yr)

Buying closing costs (%)

Selling costs (%)

Net cost of buying $197,619

Net cost of renting $186,155

Monthly mortgage payment $2,023

Under these assumptions, renting is the cheaper path over 10 years — by about $11,464 — largely because the $92,000 kept out of the house keeps compounding. Buying does not catch up within this horizon.

How this is calculated

Each year, the model tallies a net cost for each path — everything paid out, minus what you could walk away with:

Buying, money out — down payment and closing costs up front; then monthly mortgage payments (standard amortization: M = P·i / (1 − (1+i)^−N)), plus property tax and maintenance/insurance as percentages of the home's value each year.
Buying, money back — if sold at that point: the appreciated home value, minus the remaining loan balance, minus selling costs.
Renting, money out — rent, rising by the annual increase each year.
Renting, money back — the down payment and closing costs a buyer would have parked in the house instead compound at the investment return; those gains offset the rent. This opportunity-cost line is the piece most calculators leave out.

Every percentage in the "Assumptions" block is exactly that — an editable assumption, not a prediction. The defaults are broad historical-ballpark figures. Deliberately not modeled, in the interest of staying explainable: mortgage-interest tax deductions (most filers take the standard deduction), PMI on low-down-payment loans, renters insurance, taxes on investment gains, and reinvestment of monthly cash-flow differences between the two paths.

Rent or buy: the honest version of the math

"Renting is throwing money away" is the most repeated — and most incomplete — sentence in personal finance. Rent does vanish. But so do mortgage interest, property taxes, maintenance, insurance, and the roughly 9% of a home's price consumed by transaction costs over a buy-and-sell round trip. None of that builds equity either. The real comparison is between two complete packages of costs and paybacks, and it deserves real arithmetic.

The invisible line item

The piece most calculators quietly drop is what your down payment could have been doing instead. In the default scenario — a $400,000 home bought with $80,000 down plus $12,000 in closing costs — that's $92,000 that could have stayed invested. At 7% a year, it would generate roughly $89,000 of growth over a decade. A fair comparison credits the renter with those gains, exactly as it credits the buyer with home appreciation and principal paydown. With that line included, the default scenario comes out about $11,000 cheaper to rent over ten years — a conclusion that reverses if you drop the investment return a few points, or nudge appreciation up.

What actually tips the scales

Three levers dominate. First, the rent-to-price ratio: renting a $2,000 apartment versus buying a $400,000 house is a very different question from renting the same apartment versus a $250,000 house. Second, the time horizon: buying front-loads enormous one-time costs, so the longer you stay, the more years there are to amortize them — extend the comparison slider and watch the gap narrow or cross. Third, the spread between your investment return and home appreciation assumptions: houses historically appreciate a little above inflation, diversified stock portfolios historically earn more, but leverage cuts the other way — a mortgaged buyer controls a large asset with a small stake. Small changes to these assumptions legitimately flip the answer, which is why every one of them is editable rather than baked in.

What the spreadsheet can't price

Real decisions include things this page won't pretend to quantify. Owning brings stability, freedom to renovate, and a forced savings plan; it also brings illiquidity, concentration of wealth in one asset, and surprise $12,000 roofs. Renting buys flexibility — career moves, shrinking or growing households — and outsources every repair. The honest use of this calculator is to learn what the financial gap actually is under your assumptions, so you can decide whether the unpriced things are worth that gap. Sometimes they're worth far more; the point is to know the number rather than guess it.

Frequently asked questions

Why does this calculator sometimes favor renting when others favor buying?: Because it counts the opportunity cost of the money tied up in the house. A down payment and closing costs could otherwise be invested and compound for the whole period; most simple calculators ignore those foregone gains, which quietly flatters buying. Include them and close calls often flip — which is exactly why this line is on the chart.
What exactly is the opportunity cost of a down payment?: It's the investment growth that money would have produced somewhere else. $92,000 of down payment and closing costs invested at 7% for ten years would grow by roughly $89,000 — gains a buyer gives up by putting the money into a house instead. The house may appreciate too, of course; the comparison nets the two against each other.
How long do you need to stay for buying to win?: There's no universal number — it depends on the rent-to-price ratio in your market, mortgage rates, and what your alternatives earn. Buying carries heavy one-time costs (closing costs both ways), so short stays usually favor renting; extend the horizon slider and watch for the crossover year. In many realistic scenarios it lands somewhere between 5 and 15 years, and in expensive coastal markets it may never arrive.
Does this include the mortgage-interest tax deduction?: No. Since the standard deduction roughly doubled in 2018, most households no longer itemize, so the deduction is worth $0 to them. If you would itemize, buying looks somewhat better than shown here — that simplification, like PMI and reinvested monthly savings, is listed plainly in the model notes.

This calculator is an educational tool, not financial advice. Results are estimates based on the inputs and formula shown and don't account for taxes, fees, or your personal situation. Consider consulting a qualified financial professional for decisions about your money.