Home: Rent or Own?

The math behind one of the biggest financial decisions you'll make. Enter your numbers and see exactly where each path leads.

Buying

The Property

$
%
$130,000 down
%/yr

The Loan

%
%
$19,500 at closing

Ongoing Costs

%/yr
$/mo
$/mo
$/yr
$667/mo

Renting

$/mo
%/yr
$/mo

Month 1 Cost Breakdown

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

Projection Settings

Set your time horizon and expected market return to see how the two paths diverge over time.

How long you plan to stay

%/yr

Applied to the renter's investment portfolio and monthly savings.

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

After-Tax Analysis

Affects your capital gains exclusion on sale.

%
%

The Verdict

After-tax IRR over your 10-year horizon

Buyer IRR

10.0%

After-tax proceeds: $386,303

Renter IRR

11.1%

After-tax proceeds: $429,452

Renting is the stronger financial path over 10 years.

IRR is the annualized return on your day-one capital: down payment plus closing costs. Buyer IRR reflects home appreciation and loan paydown net of selling costs and tax. Renter IRR reflects the same capital invested in the market, with monthly savings reinvested. Same initial outlay, different paths.

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%+4.6% rent+1.9% rent+0.5% buy+2.4% buy+4.1% buy
6%+5.5% rent+2.7% rent+0.3% rent+1.6% buy+3.2% buy
7%+6.3% rent+3.6% rent+1.2% rent+0.7% buy+2.4% buy
8%+7.2% rent+4.5% rent+2.1% rent+0.2% rent+1.5% buy
9%+8.1% rent+5.4% rent+3.0% rent+1.1% rent+0.6% 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 measures the annualized return on the total capital deployed at time zero: the down payment plus buyer closing costs. The renter invests the same lump sum the buyer spends on day one. For buying, the terminal value is the net sale proceeds after paying off the mortgage, deducting selling costs, and subtracting capital gains tax (with a $250,000 exclusion for single filers and $500,000 for married filing jointly per IRS Section 121). For renting, the terminal value is the investment portfolio after capital gains tax. The portfolio starts with the full day-one capital invested at your specified return rate; each month, the cost difference between buying and renting is added to or subtracted from the portfolio. If renting is cheaper month-to-month, the renter reinvests the savings. If buying is cheaper, the portfolio grows more slowly to reflect the higher cash outflow.

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. A financial advisor or real estate agent can give you guidance specific to your situation.

Want to understand the full picture? Read: The American Dream, By the Numbers → for a step-by-step walkthrough of what the math behind this decision actually means.