Is it better to rent or buy a home?

It depends on your time horizon, local price-to-rent ratio, and investment returns. Generally, buying wins over 7+ years in appreciating markets; renting wins short-term or in high price-to-rent cities when the difference is invested.

What is the 5% rule for rent vs. buy?

The 5% rule states that your unrecoverable costs of owning (property tax ~1%, maintenance ~1%, cost of capital ~3%) are roughly 5% of the home value per year. If annual rent is less than 5% of the purchase price, renting may be more economical.

How does this calculator compare rent vs. buy?

The calculator projects the total net wealth under each scenario: the buy scenario tracks home equity after mortgage payments and appreciation; the rent scenario tracks the invested equivalent of the down payment plus monthly savings. The scenario with higher net wealth wins.

What home appreciation rate should I use?

US historical real estate appreciation averages 3–4% per year nominally (roughly 1–2% above inflation). Conservative analyses use 3%; optimistic ones use 5%. Local markets vary widely — check recent data for your area.

What investment return should I use for the rent scenario?

The US stock market has returned ~7% annually after inflation over the long term. For a balanced portfolio, 5–6% is a reasonable nominal assumption. Use a conservative rate (4–5%) if your investment horizon is under 10 years.

Rent vs. Buy Calculator

Compare the total wealth outcome of buying a home vs. renting and investing the difference over your time horizon.

International · Instant · Private

Region

How long do you plan to stay?

10years

Your Finances

Annual gross income

Used to estimate marginal tax rate

Estimated marginal tax rate (auto)

Editable — auto-estimated from income & region

Home Purchase

Home price

Home price is required

Down payment (20%)

Mortgage interest rate (%)

Mortgage term (years)

Home price appreciation (% / year)

This appreciation rate is historically unusual

Mortgage type

Renting

Monthly rent

Monthly rent is required

Rent increase (% / year)

Renter's insurance ($ / month)

Ownership Costs

Property tax (% of value / year)

Council Tax (£ / year)

Home insurance ($ / year)

Maintenance & repairs (% of value / year)

HOA / Condo fees ($ / month)

Property tax increase (% / year)

Transaction Costs

Buying closing costs (%)

Land transfer tax ($)

Ontario scale — editable

Stamp duty (calculated)

First-time buyer

Mortgage insurance (% of loan)

Selling costs (% at sale)

Expected Returns

Asset Allocation

Equity / Fixed income split — sets return defaults below

Domestic Dividends (%)

Foreign Dividends (%)

Interest / Income (%)

Unrealized Capital Gains (%)

Realized Capital Gains (%)

Inflation (%)

Total gross return 6.30%

Estimated after-tax return —

Investment management fees (% / year)

Real estate growth rate (% / year)

Synced with home appreciation — editable independently

—

Buyer Net Worth

—

after selling costs & taxes

Renter Net Worth

—

after capital gains tax

Break-even Year

—

Total Interest Paid

—

Total Rent Paid

—

Net Worth Over Time

Buyer

Renter

Monthly Cost Comparison

Buyer

Renter

What If?

Home appreciation 3.0%

After-tax return 5.5%

Years to stay 10

Year-by-Year Breakdown

This calculator provides estimates for educational purposes only. Actual costs vary based on your specific financial situation, local taxes, and market conditions. It does not constitute financial advice. Consult a qualified financial advisor before making housing decisions.

How the Rent vs. Buy Calculator Works

This calculator projects the total net wealth under two scenarios over your chosen time horizon: (1) buying a home and building equity, and (2) renting and investing the money you would have spent on a down payment and monthly ownership costs. The scenario with higher net worth at the end of the period is financially superior.

Key Inputs Explained

Home appreciation: Historical US average is 3–4% per year. Adjust for your local market.
Investment return: Expected annual return if you invest the difference. US stock market long-run average: ~7% nominal.
Rent growth: Rents historically grow with inflation (~3% per year nationally, higher in some cities).
Maintenance cost: Budget 1–2% of home value per year for repairs and upkeep.
Time horizon: Buying becomes more favorable over longer periods due to equity building and fixed mortgage payments.

The 5% Rule of Thumb

A quick heuristic: calculate 5% of the home's purchase price, then divide by 12. If monthly rent for a comparable home is less than this amount, renting may be more economical. The 5% covers roughly: 1% property tax + 1% maintenance + 3% opportunity cost of capital tied up in the down payment.

Rent vs. Buy Calculator

How the Rent vs. Buy Calculator Works

Key Inputs Explained

The 5% Rule of Thumb

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