What the comparison actually includes
Buying: down payment, ~3% buyer closing costs, monthly principal & interest on a 30-year loan, property tax (1.1%/yr), insurance and maintenance (1.5%/yr of the home’s value) — minus what you get back when you sell: the home’s appreciated value, less 7% selling costs and the remaining loan balance. Renting: the rent itself, growing yearly — minus the growth of the money you didn’t sink into the house (down payment and closing costs, invested), plus every month that owning would have cost more than renting, invested too.
That last piece — the opportunity cost of the down payment — is the part most rent-vs-buy conversations skip, and it’s often the deciding factor over short horizons.
What the numbers can’t tell you
Buying locks in your housing cost (rates can be refinanced down, rent only goes up), builds forced savings, and buys freedom to renovate. Renting buys mobility — career moves, neighborhood trial runs, no surprise $12,000 roof. If the dollar difference above is small relative to your income, let those factors decide; if it’s large, respect the math.
Assumptions you can’t edit (yet)
Property tax 1.1%/yr and insurance + maintenance 1.5%/yr of current home value, buyer closing costs 3%, selling costs 7%, 30-year fixed loan, no PMI (assumes ≥20% down), no mortgage-interest tax deduction (most owners take the standard deduction). Costs and proceeds are compared in nominal dollars over your horizon.
Frequently asked questions
Why does renting sometimes beat buying even when rent is high?
Because owning has large costs that build no equity: mortgage interest, property tax, insurance, maintenance, and roughly 6–8% of the home’s value in selling costs when you leave. Over a short horizon, those costs plus the forgone investment returns on the down payment can exceed what you would have paid in rent.
What time horizon makes buying worthwhile?
There is no universal number, but the break-even typically lands between 4 and 8 years in most U.S. markets: long enough for appreciation and principal paydown to outrun the transaction costs. The shorter your horizon, the stronger the case for renting. Run your own numbers — the horizon field is the one to experiment with.
What does the “investment return” field mean?
Money you don’t spend on a down payment and closing costs can be invested instead. The calculator grows that money (plus any monthly savings when renting is cheaper) at this rate — 7% is a common long-run stock-market assumption. If you would realistically leave the cash in savings, use a lower rate; that materially favors buying.
Does this include the mortgage interest tax deduction?
No. Since the standard deduction was roughly doubled in 2018, most U.S. homeowners no longer itemize, so the deduction is worth $0 to them. If you would itemize, the true cost of owning is somewhat lower than shown.
What appreciation rate should I use?
U.S. home prices have averaged roughly 3–5% per year nominally over long periods, but with huge regional and decade-to-decade swings. Try 3% and 5% and see whether the verdict changes — if it flips, your decision is really a bet on your local market.