How the calculator works
The Rent vs. Buy Calculator compares the long-term financial outcome of renting a home versus buying one.
The calculator estimates how wealth may develop under each path:
- Buy a home and build equity
- Rent and invest the difference
Main inputs
The calculator may use:
- home purchase price
- down payment
- mortgage interest rate
- mortgage term
- monthly rent
- rent growth rate
- expected home appreciation
- property tax
- maintenance cost
- insurance
- buying costs
- selling costs
- investment return
- investment fees
- time horizon
- inflation, if included
Buying path
The buying path estimates home equity over time.
Home Equity = Home Value - Remaining Mortgage Balance
Home value may grow using:
Future Home Value = Current Home Value × (1 + Appreciation Rate)^t
Mortgage balance is reduced monthly through principal payments.
Each monthly payment is split into:
Monthly Interest = Remaining Balance × Monthly Mortgage Rate
Principal Paid = Mortgage Payment - Monthly Interest
New Mortgage Balance = Previous Balance - Principal Paid
Mortgage payment
A fixed-rate mortgage payment can be calculated as:
Monthly Payment = P × [i(1 + i)^n] / [(1 + i)^n - 1]
Where:
P = mortgage principal
i = monthly interest rate
n = number of monthly payments
Ownership costs
The calculator should include ownership costs where supported.
Examples:
Property Tax = Home Value × Property Tax Rate
Maintenance = Home Value × Maintenance Rate
Other costs may include:
- insurance
- HOA fees
- buying costs
- selling costs
- renovation assumptions
These costs reduce the financial advantage of owning.
Renting path
The renting path assumes the user pays rent and invests available cash that would otherwise have gone toward buying.
Rent may increase over time:
Future Rent = Current Rent × (1 + Rent Growth Rate)^t
The renter’s investment balance grows through contributions and returns.
Investment Future Value = Contributions × [((1 + r)^n - 1) / r]
Where:
r = periodic investment return
n = number of contribution periods
Rent-and-invest difference
The key comparison is not simply rent versus mortgage payment.
The calculator compares total cash flow.
If renting is cheaper in a given month, the difference can be invested.
Invested Difference = Ownership Monthly Cost - Rent Monthly Cost
If buying is cheaper in a given month, the buyer may have more available cash.
The exact implementation should follow the current calculator logic.
Net worth comparison
Simplified:
Buy Path Net Worth = Home Equity + Investment Balance - Selling Costs
Rent Path Net Worth = Investment Balance
Difference:
Difference = Buy Path Net Worth - Rent Path Net Worth
If the difference is positive, buying is ahead.
If the difference is negative, renting and investing is ahead.
Example calculation
Example assumptions:
Home price: $400,000
Down payment: 20%
Mortgage rate: 5%
Mortgage term: 30 years
Monthly rent: $1,800
Rent growth: 3%
Home appreciation: 3%
Investment return: 7%
Time horizon: 10 years
The calculator estimates:
Buying path: equity built through mortgage repayment and home appreciation
Renting path: investment balance from invested savings and down payment opportunity cost
The result depends heavily on mortgage rate, rent level, investment return, ownership costs, and time horizon.
Why opportunity cost matters
Buying a home usually requires a down payment and transaction costs.
That money could otherwise be invested.
The calculator should treat the down payment as part of the comparison, not as free money.
Down Payment Opportunity Cost = Future Value of Down Payment if Invested
This is one of the most important assumptions in rent vs. buy comparisons.
What this calculator does not account for
This calculator does not fully model:
- lifestyle preference
- moving flexibility
- local tax law
- transaction delays
- unexpected repairs
- renovation costs
- refinancing
- changing mortgage rates
- vacancy risk
- investment volatility
- emotional value of ownership
- neighborhood-specific price changes
Best way to use this calculator
Use this calculator to test sensitivity.
Try changing:
- home appreciation
- investment return
- rent growth
- mortgage rate
- maintenance cost
- time horizon
Rent vs. buy decisions are often sensitive to local assumptions. Small changes can reverse the result.
Changelog
April 2026
Initial public methodology page created.