Rent vs. Buy Calculator

Buying is cheaper if you stay for 4.4 years or longer. Otherwise, renting is cheaper.

Average Monthly Cost

Related Mortgage Calculator | House Affordability Calculator
Should I rent or buy? This is the all-important, life-changing question every potential homeowner will face. For our Rent vs. Buy Calculator, we evaluate the decision from a purely financial standpoint. We base the calculations on many assumptions, such as constant home value appreciation rates and constant rental fee increases rates in the future. We assume the user can afford to either buy or rent. We strive to give users the best results possible. However, because our calculator cannot precisely predict the future, the result is an estimate based on input values only. Also, this calculator is intended for use by U.S. residents only. In the real world, numbers cannot reflect many intangible human elements involved in the Rent vs. Buy question, such as the value of homeownership or not having to deal with landlords. Sometimes, buyers want the ability to do things such as paint their walls a specific color or house ten cats without hearing complaints from landlords or neighbors. Conversely, renters might prefer the peace of mind that comes with a predictable monthly rent instead of paying a large upfront down payment and closing costs. Whether renting or buying, consumers need to factor personal preferences into this decision.

What to Expect When Buying a Home

• Mortgage Calculator
• Mortgage Payoff Calculator
• House Affordability Calculator
• Down Payment Calculator
• FHA Loan Calculator
• VA Mortgage Calculator
• APR Calculator
• Down Payment Calculator

What to Know When Renting

Rent is the act of paying a landlord for the right of use on a residential property. The primary cost of renting a home is the monthly rental fee. Other costs include the security deposit, application fee, and possibly, insurance.

A rental home is typically considered a temporary residence. Its main advantage is the flexibility of negotiable lease terms, which generally range from a few months to a few years. Therefore, it makes sense for those with an uncertain future to rent instead of buy.

For more information on renting or to estimate an affordable monthly rent, please use our Rent Calculator.

Notes regarding renting

Prospective renters should keep these tips in mind before signing a lease agreement:

• Negotiating the rent and terms of a lease can help lower monthly bills. Just like car buying, it does not hurt to poke and prod a bit to see if the landlord will budge on rental costs.
• Try to get everything in writing, including promises made by landlords or renter responsibilities. It is easy to take verbal agreements as is, but written agreements will be your friend when unexpected situations arise, such as disputes over vague contract details.
• Upon moving in, take pictures of the apartment to evaluate its condition. If the landlord tries to charge for damages to the property, the lessor holds proof of the property's pre-existing condition before the move-in.
• By federal law, landlords may not refuse rent to anyone based on race, sex, religion, disability, national origin, or familial status. At the state or local level, laws against housing discrimination based on age, marital status, or sexual orientation may also apply.
• For fixed leases, landlords may not raise rent prices on existing renters during the lease term.

Should I Consider Buying or Renting?

• Average Investment Return (AIR)—This external opportunity cost is difficult to calculate accurately. This is because it involves factors ranging from whether there's a downturn in the market to the home's location.
  Worldwide economic factors can also affect returns. Annual stock market returns generally exceed mortgage interest rates historically. The lost opportunity costs associated with building equity in an owned home are therefore evident. Hence, each individual should tailor their AIR to their specific situations. For example, a senior citizen close to retirement with most of their savings in treasury bills should have a lower AIR than most. This lowers the opportunity cost of building home equity.
• Home Appreciation Rate—For most people, purchasing a home is the largest investment they'll ever make. Not surprisingly, the higher the estimated appreciation, the more sense it makes to buy. This figure might be somewhat difficult to pinpoint, but prospective buyers can employ several methods to make this estimate. The most common way is to research the most recent comparable sales within the same zip code. Using this method, the appraiser estimates their appreciation over time using purchase and sales prices and averages them all out to calculate a reasonable estimate. On average, home values appreciate by about 3-5% a year in the U.S.
• Mortgage Interest Rate—Considering the size of a home purchase, one can expect the amount of money going towards interest to be relatively high, even in an environment of low mortgage rates. Borrowers can calculate this cost simply by inputting the interest rate listed on the mortgage papers from the lenders to run calculations.

Minor Factors

Though not as crucial to the process as the four variables above, borrowers need to determine the effects of additional factors to receive the most accurate results.

Aside from the purchase price of the home itself, these costs usually include:

• Property taxes
• Homeowners' insurance
• Maintenance
• Repairs
• Condo or HOA fees
• Buying and selling costs

Rent usually involves fewer additional costs. Aside from the rent itself, expenses to take note of are the:

• Application fee or upfront cost
• Security deposit
• Renter's insurance
• Rent increases