How the rent vs. buy comparison works
Buying is not just the mortgage payment against the rent. The calculator follows two households for the same number of years. The buyer pays the down payment, closing costs and every month the mortgage, property tax, insurance, HOA, maintenance and any mortgage insurance. The renter pays rent and invests the down payment, the closing costs and, each month, whatever owning would have cost above the rent. If renting costs more in a month, the buyer invests the difference instead.
Buyer’s net worth = home value − selling costs − loan balance + buyer’s investments
Renter’s net worth = renter’s investments
The break-even year is the first year in which the buyer comes out ahead. Before that, the transaction costs of buying and selling usually outweigh the equity built.
What moves the answer most
How long you stay, the rent for a truly comparable home, the gap between home price growth and investment returns, and the mortgage rate. Try a lower appreciation rate and a shorter stay to see how quickly buying becomes the more expensive choice.
What is left out
Income taxes (mortgage interest and property tax deductions, capital gains exclusions and taxes on investment returns), rent control, moving costs and major one-off repairs. Figures are estimates in today’s dollars, not financial advice.