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Rent vs Buy: How to Decide

8 min read · Updated September 26, 2026 · by Thomas M, Registered Investment Adviser (South Carolina)

Rent vs Buy: How to Decide – feature image

Renting and buying cost different things at different times, so you need to compare them on equal terms. The cleanest way is net worth at the end of the time you expect to stay. This guide explains the method behind the calculator.

The buyer’s side

The buyer pays the down payment and closing costs, then each month the mortgage, property tax, insurance and maintenance. At the end, the buyer owns equity: home value × (1 − selling costs) − remaining loan.

The renter’s side

The renter pays rent, and invests the cash the buyer tied up — the down payment and closing costs — plus every month whatever owning would have cost above the rent. At the end, the renter owns the investment pot.

The comparison

For a $400,000 home, 20% down at 6.5%, 3% price growth, $2,200 rent growing 3%, over 10 years: $234,028.95 for the buyer against $238,233.25 for the renter; break-even not within 10 years.

What flips the answer

  • Time horizon: short stays rarely recover buying and selling costs.
  • Rent relative to price: when rent is high compared with purchase price, buying wins sooner.
  • Price growth and investment returns: the two big uncertainties.

Run your own numbers in the rent vs buy calculator.

Practice questions

Test yourself, then tap to check. Answers are calculated by the tools linked below.

  1. A $350,000 home (10% down, 7% rate, 30 years), 2% price growth, $1,900 rent rising 3%, 6% investment return, 8-year stay. Buy or rent?
    Show answer

    After 8 years, renting leaves you better off by: $63,199.88

  2. A $450,000 home, 10% down, 7% rate, 30 years. What is the monthly principal and interest?
    Show answer

    Monthly payment (principal + interest): $2,694.48

  3. Income $85,000, $250 of monthly debts, $40,000 down, 6.75% rate, 30 years, 1.2% property tax, $1,400 insurance. What price is affordable?
    Show answer

    Estimated home price you can afford: $271,146.16 · Estimated monthly housing payment: $1,983.33

Frequently asked questions

How long do I need to stay for buying to pay off?

Often five to seven years or more; the calculator shows the break-even for your inputs.

Is renting throwing money away?

Rent buys housing, just as interest, tax and upkeep do for owners. What matters is what each path leaves you with.

Does this include tax benefits?

No; deductions vary and would favour buying.

What if home prices fall?

Set growth to zero or negative to see the downside.

Try it yourself

Rent vs Buy CalculatorCompare the long-term net worth of buying a home against renting and investing the difference, with a break-even year.Mortgage CalculatorEstimate a monthly mortgage payment, total interest and total cost.Home Affordability CalculatorEstimate the home price you can afford from income, debts, down payment and rate using lender debt-to-income ratios.

Keep learning

How to Calculate How Much House You Can Afford8 min readHow Mortgage Payments Work7 min readHow Compound Interest Works7 min read

Reviewed by Thomas M, Registered Investment Adviser (South Carolina), who launched his own financial advisory firm in 2010. Spot a mistake? Tell us. See our editorial policy. Finance content is educational and not financial advice; see the disclaimer.