Rent vs. Buy Calculator

Model the true cost of each path. See how equity and investment returns diverge over your time horizon, and find where the two lines cross.

Buying

$
%
$130,000 down
%
%/yr
%/yr
$190/mo
$/mo
$/yr
$667/mo
%
$19,500 at closing
%/yr

Renting

$/mo
%/yr
$/mo
%/yr

Applied to the renter's investment portfolio

How long you plan to stay

Used for after-tax IRR

%
%

Month 1 Cost Breakdown

True cost of each path in the first month

Buying

Mortgage P&I$3,373/mo
Property tax$596/mo
Home insurance$190/mo
Home upkeep$667/mo
Total$4,825/mo

Renting

Monthly rent$3,200/mo
Renters insurance$20/mo
Total$3,220/mo

$1,605/mo more to buy than to rent in month 1

Buyer Equity vs. Renter Portfolio: $650,000 Home over 10 Years

Buyer: home equity. Renter: investment portfolio value (down payment + savings, compounded).

Where Your Mortgage Payment Goes

Interest vs. principal by year over the full 30-year loan term

$694,178

total interest paid over 30-year loan term

The Verdict

After-tax IRR over your 10-year horizon

Renting is the stronger financial path over 10 years.

Buying returns 9.4% annually after tax vs. 11.1% for renting, a 1.7 percentage point advantage for renting over your 10-year horizon.

Buyer IRR

9.4%

After-tax proceeds: $366,803

Renter IRR

11.1%

After-tax proceeds: $429,395

IRR reflects annualized return on initial capital (down payment + closing costs) assuming sale at end of horizon. Does not account for mortgage interest deductions or alternative investment strategies.

How Sensitive Is This?

IRR advantage by home appreciation rate vs. market return rate, at your selected time horizon

Market Return
Home Appreciation
1%2%3%4%5%
5%+5.5% rent+2.6% rent+0.0% rent+2.0% buy+3.7% buy
6%+6.4% rent+3.4% rent+0.9% rent+1.1% buy+2.8% buy
7%+7.2% rent+4.3% rent+1.7% rent+0.2% buy+2.0% buy
8%+8.1% rent+5.2% rent+2.6% rent+0.7% rent+1.1% buy
9%+9.0% rent+6.1% rent+3.5% rent+1.6% rent+0.2% buy

Each cell reruns the full projection at that combination of rates. All other inputs are held constant.

How this works

The monthly cost breakdown shows the true cost of buying in month one: mortgage principal and interest (calculated using the standard amortization formula), property tax, home insurance, HOA, and annual home costs. If your down payment is below 20%, PMI is added at 0.5% of the home price annually as a simplification — actual PMI rates range from 0.46% to 1.50% of the loan amount depending on credit score and down payment, per the Urban Institute. PMI drops off once the loan-to-value ratio falls below 80%, accounting for both principal paydown and home appreciation.

The projection chart shows two growing lines over your chosen horizon. The buyer's line is home equity: current home value minus remaining loan balance. The renter's line is portfolio value: the down payment and closing costs invested at your specified return rate, plus monthly savings compounded each month when buying costs more than renting. These are wealth values, not net-of-cost positions — cost accounting happens in the IRR section.

The crossover year marks when the buyer's equity first exceeds the renter's portfolio value. It depends heavily on appreciation rate, mortgage rate, and the monthly cost gap between buying and renting.

The after-tax IRR converts each path into an annualized return on initial capital using a two-cashflow model: (terminal value / initial outlay)^(1/years) − 1. For buying, the initial outlay is the down payment plus closing costs; the terminal value is the net sale proceeds after paying off the mortgage, deducting selling costs, and subtracting capital gains tax. The capital gains exclusion ($250,000 for single filers, $500,000 for married filing jointly per IRS Section 121) is applied before calculating tax owed — this assumes you have owned and used the home as your primary residence for at least two of the five years before sale. For renting, the initial outlay is the same down payment plus closing costs invested in the portfolio; the terminal value is the portfolio value after capital gains tax on investment gains. Both IRRs measure return on the same initial capital, making them directly comparable. Net position and IRR can disagree — especially at short horizons — because IRR accounts for selling costs and taxes that reduce terminal proceeds without affecting raw equity.

This tool is for informational purposes only. It does not account for mortgage interest deductions, state income taxes on investment gains, transaction timing, or changes in tax law. Talk to a financial advisor and a real estate agent before making this decision.