# Rent vs buy: which is better?

Compares the net worth of buying a home with renting and investing the difference, month by month, and finds when buying breaks even.

- Page: https://www.acalculator.org/finance/rent-vs-buy-calculator
- JSON spec: https://www.acalculator.org/finance/rent-vs-buy-calculator.json
- Version: 3c5f6eb76b23

## Default answer

Example with the default inputs (Home price $400,000.00, Down payment 20%, Mortgage rate 5.5%, Mortgage length (years) 30, Rent per month $1,800.00, How long will you stay? (years) 10, Property tax (per year) 1.2%, Home insurance (per year) 0.5%, Maintenance (per year) 1%, HOA fee per month $0.00, Mortgage insurance (PMI, per year) 0.5%, Closing costs when buying 2%, Costs of selling 6%, Home value growth (per year) 3%, Rent increase (per year) 2%, Investment return (per year) 7%, Capital gains tax rate 15%, Household income (per year) $80,000.00, Tax filing status Single): Renting leaves you $48,723.67 better off after 10 years.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| homePrice | Home price | The price of the home you would buy. |
| downPaymentPercent | Down payment | The share of the price paid up front; the rest is the mortgage. |
| interestRate | Mortgage rate | The fixed yearly mortgage interest rate (APR), paid monthly. |
| loanTerm | Mortgage length (years) | How many years the fixed-rate mortgage runs. |
| monthlyRent | Rent per month | The rent for a similar home today. |
| years | How long will you stay? (years) | How many years until you would sell the home or stop renting. |
| propertyTaxRate | Property tax (per year) | Yearly property tax as a share of the home’s value. |
| homeInsuranceRate | Home insurance (per year) | Yearly homeowners insurance as a share of the home’s value. |
| maintenanceRate | Maintenance (per year) | Yearly upkeep and repairs as a share of the home’s value. |
| hoaFee | HOA fee per month | Homeowners association dues each month. |
| pmiRate | Mortgage insurance (PMI, per year) | Yearly private mortgage insurance as a share of the loan, paid while the balance is above 78% of the price. |
| buyingClosingCosts | Closing costs when buying | One-time costs to buy, as a share of the price. |
| sellingClosingCosts | Costs of selling | Agent fees and other costs to sell, as a share of the sale price. |
| homeAppreciation | Home value growth (per year) | How fast the home’s value rises each year. |
| rentAppreciation | Rent increase (per year) | How much the rent rises at the start of each new year. |
| investmentReturn | Investment return (per year) | The yearly return on money invested instead of spent on the home. |
| capitalGainsTax | Capital gains tax rate | The tax rate on investment gains, and on home sale gains above the exclusion. |
| annualIncome | Household income (per year) | Yearly income, used for the federal tax bracket and the SALT limit. |
| filingStatus | Tax filing status | The federal filing status, for the standard deduction, brackets, and home sale exclusion. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| advantage | Better off by | The difference in net worth at the end, in favor of the better choice. |
| winner | Better choice | Buying or renting, whichever ends with more. |
| buyWorth | Net worth if you buy | After selling the home at the end, paying the loan, selling costs, and tax, plus any investments. |
| rentWorth | Net worth if you rent | The renter’s investments at the end, after capital gains tax. |
| breakEven | Buying pays off after | The first month from which buying stays ahead of renting to the end. |
| payment | Mortgage payment | The monthly principal and interest payment. |
| firstBuyCost | First month cost of buying | Mortgage payment, property tax, insurance, maintenance, HOA, and PMI in the first month. |
| upfront | Cash needed to buy | The down payment plus the closing costs. |
| taxSavings | Total tax saving | Federal tax saved by itemizing mortgage interest and property tax, over the whole stay. |

## Method

Month by month, the buyer pays the mortgage and costs of owning and the renter pays rent; whoever pays less invests the difference. Net worth if you buy = home value after selling costs − loan − tax + investments; if you rent = investments after tax.

## Assumptions

- Both households start with the same cash. The renter invests the down payment and buying costs instead.
- Each month, whoever pays less for housing invests the difference at the investment return.
- Property tax, insurance, and maintenance are yearly shares of the home’s current value, paid monthly.
- Rent rises at the start of each new year. The home’s value and investments grow monthly at the yearly rates.
- PMI is paid only on a loan above 80% of the price, until the balance falls to 78% of the price.
- Federal tax saving: the 2026 tax with the standard deduction minus the tax with itemized mortgage interest (scaled by $750,000 ÷ the year’s average balance above that) and property tax (up to the SALT limit), credited once a year. It is never more than the tax owed. 2026 tax law and amounts are used for every year; state income and sales taxes are not counted.
- At the end, the home is sold: selling costs, the loan, and capital gains tax on any gain above the exclusion (after 2 years) are paid. Investment gains are taxed at the capital gains rate. A loss gives no tax back.

## Worked examples

1. homePrice = $400,000.00, downPaymentPercent = 20%, interestRate = 5.5%, loanTerm = 30, monthlyRent = $4,000.00, years = 10, propertyTaxRate = 1.2%, homeInsuranceRate = 0.5%, maintenanceRate = 1%, hoaFee = $0.00, pmiRate = 0.5%, buyingClosingCosts = 2%, sellingClosingCosts = 6%, homeAppreciation = 3%, rentAppreciation = 2%, investmentReturn = 7%, capitalGainsTax = 15%, annualIncome = $80,000.00, filingStatus = single gives payment = $1,816.92, firstBuyCost = $2,716.92, upfront = $88,000.00, buyWorth = $501,394.10, rentWorth = $160,342.92, advantage = $341,051.17, winner = Buying, breakEven = {"years":1,"months":3}, taxSavings = $12,527.10. Source: Payment from the CFPB amortization formula; 2026 tax figures from IRS Rev. Proc. 2025-32.
2. homePrice = $400,000.00, downPaymentPercent = 20%, interestRate = 5.5%, loanTerm = 30, monthlyRent = $1,800.00, years = 10, propertyTaxRate = 1.2%, homeInsuranceRate = 0.5%, maintenanceRate = 1%, hoaFee = $0.00, pmiRate = 0.5%, buyingClosingCosts = 2%, sellingClosingCosts = 6%, homeAppreciation = 3%, rentAppreciation = 2%, investmentReturn = 7%, capitalGainsTax = 15%, annualIncome = $80,000.00, filingStatus = single gives buyWorth = $245,921.19, rentWorth = $294,644.87, advantage = $48,723.67, winner = Renting. Source: Rent from US Census Bureau ACS 2019-2023 medians.
3. homePrice = $900,000.00, downPaymentPercent = 10%, interestRate = 5.5%, loanTerm = 30, monthlyRent = $3,500.00, years = 15, propertyTaxRate = 1.2%, homeInsuranceRate = 0.5%, maintenanceRate = 1%, hoaFee = $0.00, pmiRate = 0.5%, buyingClosingCosts = 2%, sellingClosingCosts = 6%, homeAppreciation = 3%, rentAppreciation = 2%, investmentReturn = 7%, capitalGainsTax = 15%, annualIncome = $250,000.00, filingStatus = married gives payment = $4,599.09, rentWorth = $1,162,056.48, advantage = $380,209.12, taxSavings = $66,345.16, winner = Renting.
4. homePrice = $400,000.00, downPaymentPercent = 20%, interestRate = 5.5%, loanTerm = 30, monthlyRent = $2,000.00, years = 5, propertyTaxRate = 1.2%, homeInsuranceRate = 0.5%, maintenanceRate = 1%, hoaFee = $0.00, pmiRate = 0.5%, buyingClosingCosts = 2%, sellingClosingCosts = 6%, homeAppreciation = 3%, rentAppreciation = 2%, investmentReturn = 7%, capitalGainsTax = 15%, annualIncome = $80,000.00, filingStatus = single gives buyWorth = $143,474.95, rentWorth = $163,093.60, winner = Renting, advantage = $19,618.66.
5. homePrice = $400,000.00, downPaymentPercent = 10%, interestRate = 5.5%, loanTerm = 30, monthlyRent = $2,500.00, years = 10, propertyTaxRate = 1.2%, homeInsuranceRate = 0.5%, maintenanceRate = 1%, hoaFee = $0.00, pmiRate = 0.5%, buyingClosingCosts = 2%, sellingClosingCosts = 6%, homeAppreciation = 3%, rentAppreciation = 2%, investmentReturn = 7%, capitalGainsTax = 15%, annualIncome = $80,000.00, filingStatus = single gives payment = $2,044.04, firstBuyCost = $3,094.04, breakEven = {"years":4,"months":0}, taxSavings = $16,986.56.
6. homePrice = $1,000,000.00, downPaymentPercent = 20%, interestRate = 5.5%, loanTerm = 30, monthlyRent = $6,000.00, years = 10, propertyTaxRate = 1.2%, homeInsuranceRate = 0.5%, maintenanceRate = 1%, hoaFee = $0.00, pmiRate = 0.5%, buyingClosingCosts = 2%, sellingClosingCosts = 6%, homeAppreciation = 3%, rentAppreciation = 2%, investmentReturn = 7%, capitalGainsTax = 15%, annualIncome = $700,000.00, filingStatus = head gives payment = $4,542.31, taxSavings = $95,416.65, breakEven = {"years":3,"months":0}, advantage = $229,513.55. Source: IRS Pub 505 SALT limit, Rev. Proc. 2025-32 brackets.
7. homePrice = $3,000,000.00, downPaymentPercent = 20%, interestRate = 5.5%, loanTerm = 30, monthlyRent = $12,000.00, years = 10, propertyTaxRate = 1.2%, homeInsuranceRate = 0.5%, maintenanceRate = 1%, hoaFee = $0.00, pmiRate = 0.5%, buyingClosingCosts = 2%, sellingClosingCosts = 6%, homeAppreciation = 3%, rentAppreciation = 2%, investmentReturn = 7%, capitalGainsTax = 15%, annualIncome = $520,000.00, filingStatus = married gives taxSavings = $143,957.03, buyWorth = $1,853,116.70, rentWorth = $2,454,050.41, winner = Renting.

## FAQ

### Is it better to rent or buy a house?

There is no single right answer to this question—the best choice depends entirely on your personal and financial situation. Buying may be better if you plan to stay in one place for several years (typically 5+), are financially stable with good credit, have saved for a down payment and closing costs, and want the freedom to build equity and customize your living space. Renting may be better if you value flexibility, might relocate for a job in the near future, have limited savings, or prefer not to be responsible for property maintenance, repairs, and taxes. The key is to weigh the financial benefits of building home equity against the flexibility and lower upfront costs of renting.

### What are the main financial benefits of buying a home?

While homeownership comes with significant responsibilities, the financial advantages can be substantial over the long term. Building Equity: This is your home's current market value minus what you owe on your mortgage. Each mortgage payment you make increases your equity, essentially turning your housing costs into a form of forced savings. Appreciation: While not guaranteed, home values have historically tended to increase over time. This increase in value directly contributes to your personal wealth. Tax Benefits: Homeowners in the U.S. may be able to deduct mortgage interest and property taxes from their federal income tax. Stable Payments: With a fixed-rate mortgage, your principal and interest payment will not change for the entire term of the loan (e.g., 30 years), providing predictability that renting often doesn't offer.

### What are the "hidden costs" of buying a home?

Beyond your mortgage payment, homeownership comes with several ongoing costs that renters don't typically face: Property Taxes: Annual property taxes can range from 0.5% to 2% of your home's value, depending on your location. Homeowners Insurance: Protects your home and belongings from damage or theft. Premiums typically cost 0.5% to 1% of your home's value annually. Maintenance and Repairs: As a general rule, budget 1% to 4% of your home's value annually for maintenance and repairs. Utilities: Homeowners typically pay higher utility costs than renters, especially for larger homes. HOA Fees: If you live in a community with a homeowners association, you'll pay monthly or annual fees for shared amenities and maintenance. These costs can add 20% to 50% to your monthly housing expenses beyond your mortgage payment.

### How does a rent vs. buy calculator work?

A rent vs. buy calculator works by comparing the total costs of both scenarios over a period of time. It considers all the variables to find the "break-even point"—the point in time where the total cost of owning becomes less than the total cost of renting. The calculation incorporates inputs like home purchase price and down payment amount, mortgage interest rate and loan term, ongoing ownership costs (property taxes, insurance, maintenance), your current rent and expected annual rent increases, and the estimated rate at which the home's value will appreciate. By analyzing these factors, the calculator provides a data-driven estimate of when buying becomes the more financially advantageous choice for you.

### How much do I really need for a down payment?

The myth that you absolutely need a 20% down payment is one of the biggest barriers for first-time homebuyers. While a 20% down payment allows you to avoid PMI, many loan programs require much less. FHA Loans: Backed by the Federal Housing Administration, these loans allow for down payments as low as 3.5%. VA Loans: For eligible veterans, active-duty service members, and surviving spouses, these loans often require no down payment at all. Conventional Loans: Some conventional loans allow for down payments as low as 3%.

### Where can I find more information?

Empowering yourself with knowledge is the best first step. Consumer Financial Protection Bureau (CFPB) offers a comprehensive guide to the home buying process, from budgeting to closing. Fannie Mae provides free online homebuyer education courses. Zillow & Redfin are great resources for browsing local listings, understanding market trends, and finding estimated property tax and insurance costs for specific homes. Use our calculator above as your starting point. Change the variables to match your local market and personal financial situation to get a clear, personalized picture of what makes the most sense for you.

## Sources

- IRS Rev. Proc. 2025-32 and IRS newsroom release for tax year 2026: tax brackets and standard deductions. https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
- IRS Rev. Proc. 2025-32, section 4.01 tables 1 to 3 (2026 tax rate tables), Internal Revenue Bulletin 2025-45. https://www.irs.gov/irb/2025-45_IRB
- IRS Publication 505 (2026): SALT deduction limit of $40,400, reduced for modified AGI above $505,000, not below $10,000. https://www.irs.gov/publications/p505
- IRS Publication 936, Home Mortgage Interest Deduction ($750,000 limit). https://www.irs.gov/publications/p936
- IRS Publication 523, Selling Your Home ($250,000 or $500,000 gain exclusion after 2 of 5 years). https://www.irs.gov/publications/p523
- Consumer Financial Protection Bureau, When can I remove private mortgage insurance (PMI) from my loan? (Homeowners Protection Act: automatic end at 78% of the original value). https://www.consumerfinance.gov/ask-cfpb/when-can-i-remove-private-mortgage-insurance-pmi-from-my-loan-en-202/
- Freddie Mac, Breaking down PMI (about $30 to $70 a month per $100,000 borrowed). https://myhome.freddiemac.com/buying/breaking-down-pmi
- U.S. Census Bureau, 2019-2023 ACS 5-year estimates press release (median home value $303,400, median gross rent $1,348 a month). https://www.census.gov/newsroom/press-releases/2024/acs-5-year-homeowners-renters.html