Rent vs Buy Calculator | Break-Even Year & True Cost Comparison | Lofty
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Rent vs Buy Calculator
Model the true cost of owning (PITI, HOA, maintenance, selling costs) against renting (rent growth plus what your down payment could earn invested) and find the year buying pulls ahead.
Your numbers
Property
- Home price
- Buyer closing costs% Loan, title, and escrow costs, typically 2–5% of price.
Renting
- Rent for a comparable home
- Renters insurance$ Per month. Typically $10 to $25.
Expenses
- Property taxes$ Per month. Roughly 1.0% to 1.5% of price per year.
- Home insurance$ Per month.
- Maintenance% Annual upkeep as a % of home value. 1% is a common rule of thumb.
- HOA dues$ Per month. Leave at $0 if none.
Financing
- Down payment%
- Interest rate%
- Loan term yrs
Long-term assumptions
- Annual rent growth%
- Home appreciation%
- Investment return on saved cash% What the down payment could earn invested instead (opportunity cost).
- Planned years in the home yrs
What is a rent vs buy calculator?
A rent vs buy calculator compares the total cost of owning a home: mortgage, taxes, insurance, maintenance, and selling costs, minus equity and appreciation, against the total cost of renting, including the investment return you give up by tying cash up in a down payment. The break-even year is the first year buying nets out cheaper than renting.
What your scenario is telling you
Break-even lands after your planned stay
Buying does not catch up to renting until year 9, but you plan to stay 7 years. Renting and investing the difference likely wins at your horizon.
Typical ownership premium
Owning costs about 34% more per month than renting. That premium is what equity buildup and appreciation need to earn back over time.
Your invested cash outpaces the house
At a 7.0% investment return versus 3.5% appreciation, the renter's invested down payment compounds faster than the home's value, a key driver of the result.
How investors usually read these numbers
| Metric | Often strong | Watch out | Why it matters |
|---|---|---|---|
| Break-even year | At or before year 5 | Beyond your planned stay | Transaction costs take years to recoup. Buying only wins if you stay past the crossover point. |
| Ownership premium | Owning within 25% of comparable rent | Owning costs 50%+ more than renting | The bigger the monthly gap, the more appreciation must do the work of catching up. |
| Planned stay | 7+ years | Under 3 years | National studies consistently put the typical rent-vs-buy break-even between 3 and 7 years. |
| Price-to-rent ratio | Below 15 (price / annual rent) | Above 21 | High price-to-rent markets like coastal metros structurally favor renting; low ones favor buying. |
| Investment return vs appreciation | Appreciation near or above your alternative return | Alternative return far above appreciation | If invested cash compounds much faster than the home appreciates, renting keeps more wealth growing. |
How to run a rent vs buy analysis
Enter the home price and financing
Set the price, down payment, interest rate, loan term, and buyer closing costs (typically 2% to 5%).Add the full cost of owning
Include monthly property taxes, insurance, HOA dues, and annual maintenance as a percent of value. 1% per year is a common maintenance rule of thumb.Enter what renting the same home costs
Use the market rent for a comparable property plus renters insurance.Set growth and opportunity-cost assumptions
Choose rent growth, home appreciation, and the return your cash could earn invested instead of sitting in a down payment.Pick your planned years in the home
The calculator compares total net costs at that horizon and finds the first year buying pulls ahead.Read the break-even year and net advantage
If the break-even year lands after your planned stay, renting likely wins financially; if it lands before, buying builds more wealth by the time you move.
The math behind the result
Core formulas
- Monthly ownership cost = principal and interest + property taxes + insurance + HOA + maintenance (% of value / 12).
- Net cost of buying through year N = down payment + closing costs + cumulative ownership costs - net sale proceeds (value x (1 - selling costs) - loan balance).
- Net cost of renting through year N = cumulative rent and renters insurance - investment growth the renter earns on the down payment and closing costs.
- Break-even year = first year where the net cost of buying is at or below the net cost of renting (capped at 30 years; 0 means never).
- Net advantage at your horizon = net cost of renting - net cost of buying at the planned year. Positive means buying wins.
Expert takeaways
- The break-even year is driven mostly by transaction costs. Roughly 3% to buy and 6% to 8% to sell means short stays almost always favor renting, no matter how the monthly payments compare.
- Opportunity cost is the input most rent-vs-buy math quietly skips. A $92,000 down payment plus closing compounding at 7% grows by about $56,000 over 7 years, money a renter keeps working in the market.
- Owning costs more than PITI. Maintenance at roughly 1% of home value per year, plus HOA and insurance inflation, routinely adds 20% to 30% on top of the mortgage payment.
- Appreciation assumptions swing the answer more than any other input. Run the model at 2%, 3.5%, and 5% appreciation before trusting a single break-even year.
- If your planned stay is shorter than the break-even year, renting and investing the difference is usually the stronger financial move, buying then is a lifestyle choice, not an investment one.
Key terms in plain English
Break-even year
First year buying nets out cheaper than renting. The break-even year is the first year when the total net cost of buying, including upfront cash, ongoing costs, and the equity you would walk away with after selling, drops to or below the total net cost of renting. Before that year, a renter who invests the difference is ahead.
Opportunity cost
The return your down payment could earn elsewhere. Cash tied up in a down payment and closing costs cannot compound in stocks, index funds, or income real estate. A fair rent-vs-buy comparison credits the renter with that investment growth, which is why simply comparing rent to a mortgage payment overstates the case for buying.
Price-to-rent ratio
Home price / annual rent for a comparable home. The price-to-rent ratio compares what a home costs to buy against what it costs to rent for a year. Ratios below about 15 generally favor buying, while ratios above about 21 favor renting. Expensive coastal metros routinely run above 25.
PITI
Principal, interest, taxes, insurance. PITI is the standard description of a full monthly mortgage payment: loan principal, interest, property taxes, and homeowners insurance. Add HOA dues and maintenance to get the true monthly cost of ownership this calculator uses.
Net sale proceeds
Sale price minus selling costs and loan payoff. When an owner eventually sells, they receive the home's value minus selling costs (typically 6% to 8%) and the remaining mortgage balance. Those proceeds are what make buying win over long horizons, so the model credits them back to the buyer at every year.
People also ask
What is a rent vs buy calculator?
A rent vs buy calculator compares the full multi-year cost of owning a home against renting a comparable one. It counts the buyer's down payment, closing costs, mortgage, taxes, insurance, HOA, maintenance, and eventual selling costs, credits back equity and appreciation, and credits the renter with investment growth on the cash they did not tie up in a down payment. The output is a break-even year and a dollar advantage at your planned horizon.
How is the break-even year calculated?
For every year up to 30, the calculator totals the net cost of buying (upfront cash plus cumulative ownership costs minus what you would pocket by selling that year) and the net cost of renting (cumulative rent minus the growth your invested down payment earned). The break-even year is the first year the buying total drops to or below the renting total. If that never happens within 30 years, the calculator reports no break-even.
Is it cheaper to rent or buy in 2026?
On a pure monthly basis, renting is cheaper than buying in most large U.S. metros in 2026, because mortgage rates near 6.5% to 7% and elevated prices push ownership costs well above comparable rents. Buying still wins over longer horizons in many markets once equity and appreciation accumulate. The honest answer depends on your market's price-to-rent ratio and how long you plan to stay, which is exactly what the break-even year measures.
How long do you need to stay in a home for buying to make sense?
Most scenarios produce a break-even between 3 and 7 years. Buying and selling costs roughly 9% to 12% of the home's value round-trip, and it takes years of equity buildup and appreciation to recover that. If you expect to move within 3 years, renting almost always wins; past 7 to 10 years, buying usually does.
Why does the calculator include an investment return on my down payment?
Because a renter does not tie up cash in a down payment, that money can compound elsewhere, an index fund, bonds, or income real estate. Ignoring that growth is the most common flaw in rent-vs-buy math and makes buying look artificially good. At a 7% return, $100,000 of avoided upfront cash grows by roughly $61,000 over 7 years, which is a real cost of choosing to own.
Does the calculator account for home equity?
Yes. Every year, the model calculates what you would walk away with if you sold: the appreciated home value minus selling costs and the remaining loan balance. That equity credit is what eventually makes buying win, early on it is small because payments are mostly interest and selling costs eat the gains, but it compounds as the loan amortizes.
What costs of owning do renters not pay?
Owners pay property taxes, homeowners insurance, all maintenance and repairs (roughly 1% of home value per year on average), HOA dues where applicable, and 6% to 8% selling costs when they leave. Renters pay rent and a small renters insurance premium, and the landlord absorbs the rest. That is why comparing rent to a bare mortgage payment understates the cost of owning by 20% to 30%.
How does home appreciation change the answer?
Appreciation is the single most powerful input. At 3.5% annual appreciation a $400,000 home gains about $110,000 of value in 7 years, which heavily favors buying. At 1% to 2%, the break-even can slip past a decade. Because nobody can predict local appreciation, run the calculator at a conservative, moderate, and optimistic rate and see whether the decision changes.
What is the 5% rule for renting vs buying?
The 5% rule is a shortcut: multiply the home price by 5% and divide by 12; if rent for a comparable home is less than that number, renting is likely cheaper. The 5% approximates the owner's unrecoverable costs: about 1% property tax, 1% maintenance, and 3% cost of capital. It is a useful screen, but a year-by-year model like this one captures rent growth, amortization, and selling costs that the shortcut ignores.
Should I buy a home as an investment?
A primary residence is usually a weaker pure investment than it feels: it produces no rent, consumes taxes, insurance, and maintenance, and concentrates wealth in one asset with 9% to 12% round-trip transaction costs. Owning can still build wealth through leverage and forced savings, but investors who want real estate returns without those frictions often do better renting where they live and buying income property, or fractional shares of rentals, where the numbers work.
Does this calculator include tax benefits of owning?
No. Since the standard deduction nearly doubled, most homeowners no longer itemize, so the mortgage-interest deduction provides no benefit to the majority of buyers. High earners in expensive homes who do itemize can see modest savings, which would shift the break-even slightly in favor of buying. Treat that as upside rather than baseline.
Want real estate exposure without buying the whole property?
Lofty lets investors browse fractional U.S. rental properties, compare listed assumptions, and start with a smaller minimum than a traditional down payment.