Compares net worth on each path: the buyer builds home equity, the renter invests the down payment and any monthly savings. Where do the lines cross?
Selling costs (agent commissions, transfer taxes) are subtracted from the buyer's equity, since that's what it would cost to cash out.
What the renter earns on the invested down payment — and what either side earns on monthly savings vs. the other.
This rent vs. buy calculator compares two financial paths side by side: the buyer builds equity but pays closing costs, maintenance, taxes, and interest, while the renter invests the down payment and any monthly savings. It plots both net-worth curves and marks the year buying pulls ahead.
The model runs two parallel paths month by month. The buyer builds equity through appreciation and principal paydown but pays closing costs, mortgage interest, property tax, insurance, and maintenance. The renter invests the down payment and any monthly savings at your assumed return. Net worth on each side is tracked over time, and the break-even point is the year the buyer's net worth (after selling costs) overtakes the renter's.
Buying tends to win the longer you stay, because transaction costs are spread over more years and equity compounds. Short stays usually favor renting.
It is the year the buyer's net worth overtakes the renter's. Before that point renting and investing leaves you wealthier; after it, owning does.
Yes. The model accounts for purchase and selling costs, property taxes, insurance, and ongoing maintenance so the comparison reflects the true cost of ownership.
Usually, but not always. If rent is cheap relative to home prices, or mortgage rates are high and investment returns strong, renting and investing the difference can stay ahead for the entire horizon.
A diversified portfolio has historically returned around 7% before inflation, though a conservative estimate is safer. The comparison is sensitive to this number, so it's worth testing a range.
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