Rent vs Buy Calculator
The Net Worth Battle: Compare the true cost of renting vs buying over time. Find your breakeven point.
Renting Scenario
Buying Scenario
Assumptions
Return on down payment if invested instead
The Verdict
Enter your numbers above
📊 Methodology: Mortgage calculations use standard amortization. Investment returns compound monthly. Opportunity cost includes both down payment and monthly cash flow differentials.
📐 What is the 5% Rule?
The 5% Rule is a quick way to estimate unrecoverable costs. Multiply the home price by 5% and divide by 12. If your monthly rent is lower than this number, renting is likely the better financial choice.
Based on your $0 home price, the 5% Rule threshold is $0/month.
Understanding the Rent vs Buy Decision
The decision to rent or buy isn't just about monthly payments—it's about building long-term wealth. This calculator compares your net worth trajectory under both scenarios, factoring in opportunity cost, home appreciation, and unrecoverable costs.
How We Calculate This
Our methodology is based on Ben Felix's research and the principles of opportunity cost investing:
For Renters
We assume you invest the down payment and the monthly cash flow difference. Your portfolio grows at the specified investment return rate.
For Buyers
We track home equity growth minus unrecoverable costs (mortgage interest, taxes, maintenance, closing costs). Any monthly savings vs. renting goes to investments.
What Are Unrecoverable Costs?
Renter's Costs
Your entire rent payment goes to the landlord. However, you avoid property taxes, maintenance, and interest payments. Investing the difference can build wealth.
Buyer's Costs
Mortgage interest (~60% of early payments), property taxes (1-2%/yr), insurance, maintenance (1%/yr), HOA fees, and closing costs. These don't build equity.
Key Insight
Many first-time buyers underestimate how long it takes for appreciation to offset these costs. Breakeven is typically 5-7 years in an average market.
Frequently Asked Questions
Is renting really "throwing money away"?
No. While you don't build equity, you also avoid many costs that don't build wealth either. If you're disciplined about investing the difference (down payment and monthly savings), renting can sometimes build more wealth than buying. It depends on local market conditions.
What is the 5% Rule?
Ben Felix popularized this quick estimation. Multiply the home price by 5% and divide by 12. If your monthly rent is lower than this result, renting is likely the better financial choice. We calculate this automatically above.
Does this calculator include inflation?
Yes, the calculator factors in rent inflation (your rent increases each year) and home appreciation. Both are adjustable in Advanced Options.
How long does it take to break even on a house?
Typically 5 to 7 years, assuming average appreciation and typical costs. If you plan to move sooner, renting is usually cheaper due to upfront costs like closing costs and realtor commissions when selling.
What are "Unrecoverable Costs"?
Money you spend that doesn't build wealth. For renters, it's rent. For buyers, it's mortgage interest, property taxes, HOA fees, homeowner insurance, and maintenance (approximately 1% of home value per year).
Should I put 20% down?
Ideally, yes. Putting 20% down avoids Private Mortgage Insurance (PMI), which is an extra monthly fee that protects the lender, not you. However, you should weigh this against other financial goals.