Is it financially better for me to rent or buy a home?

What this tells you

The headline is the equivalent monthly rent: the starting rent that would leave you about equally well off as buying, after your chosen number of years. If a similar home rents for less, renting builds more wealth in this model. If it rents for more, buying does. Treat the threshold as an estimate to the nearest dollar, not a precise market price.

Buying builds equity, the home value left after subtracting your mortgage debt. Renting can leave money available to invest instead. This calculator compares both, including the costs of entering and leaving each arrangement. The method follows the opportunity-cost idea behind the New York Times rent-versus-buy calculator. It is not an exact reproduction of that calculator.

Where the money goes

Both paths start with the same cash, enough to cover whichever has the larger upfront cost. The renter invests the avoided down payment and buying fees, after paying the security deposit and rental broker fee. If renting needs more cash upfront, the buyer invests the difference instead.

Each month, both paths have the same spending budget. Whoever spends less on housing invests the savings at the end of that month. The buyer pays the mortgage, property tax, home insurance, maintenance and homeowners association dues. The renter pays rent and renters insurance. When the mortgage ends, the buyer can invest more of the savings.

The investment return is an assumed annual return, compounded monthly. Compounding means returns themselves can earn returns. The model taxes investment gains when you leave, not the money you originally contributed. Real returns fluctuate and can be negative; this calculator's return input only covers constant nonnegative returns.

Reading the chart and break-even year

Each chart point asks what would happen if you left in that year. The buyer sells the home, pays selling fees, repays the mortgage and pays any tax due. The renter gets the full original security deposit back. Both sell their investments and pay gains tax. These are alternative exit dates, not repeated sales of the same home.

The break-even year is the first whole year when buying catches up with renting at your entered rent. Buying can fall behind again later. The table shows those reversals. The headline and final net-worth figures use your holding duration; the chart always runs from year zero through year 30. Year zero includes the cost of an immediate sale.

Net worth here means wealth resulting from the housing decision. It does not include your retirement accounts, other property, or unrelated debts. A negative buyer result means the sale proceeds and savings do not cover the remaining debt and exit costs. All figures are future dollars, not today's purchasing power.

Mortgage insurance and taxes

Private mortgage insurance (PMI) protects the lender. With less than 20% down, the model charges an illustrative 0.5% of the original loan each year. It stops once projected home equity reaches 20%, checked before each payment, and never restarts. Actual premiums and cancellation depend on your loan, appraisals and payment history. The statutory rules based on original value are different. Zero down is a mathematical scenario, not a promise that this conventional loan is available.

The tax calculation is a fixed 2025 US single-filer illustration, not current-year or future tax advice. It assumes a $15,750 standard deduction, a $40,000 state-and-local tax deduction cap, income below the $500,000 cap phaseout, and no other itemized deductions. The model uses only property tax within that cap; state income taxes are not supplied.

You receive a tax benefit only when eligible mortgage interest plus eligible property tax exceed the standard deduction. The excess is multiplied by your marginal tax rate and credited at year-end. Interest on a loan above $750,000 is reduced by a fixed share based on its original balance. This conservative approximation does not update the IRS average-balance limit as the loan is paid down. Tax thresholds stay fixed for all 30 years, even though laws and inflation adjustments will change.

After two years, the model assumes the home qualifies for the single-filer $250,000 capital-gains exclusion. Before two years, it assumes no exclusion. A capital gain is the sale price minus selling fees and the purchase price. Buying fees are treated as spent costs rather than additions to the home's tax basis. Some real closing costs can increase basis, so this can overstate taxable gains. There is no deduction for a home-sale loss.

Growth and costs

• The mortgage has a fixed rate, with monthly payments and no refinancing or extra payments. Amortization is the gradual repayment of principal through those payments.
• Home values grow smoothly. Property tax, home insurance and maintenance are recalculated annually using home value at the start of the year.
• Rent increases at each anniversary. Inflation increases HOA fees and renters insurance. Other growth assumptions already include inflation; it is not added a second time.
• The deposit earns no interest, requires no top-ups and is returned in full. The rental broker fee is paid once and is not returned.
• Investment gains are taxed once at the supplied rate. No dividend taxes, fees, tax-loss benefits, short-term tax-rate differences or retirement-account rules are modelled.

What this does not include

Moving costs, utilities, renovations, special assessments, refinancing, rent concessions, local housing restrictions, other assets or debts, and local tax differences are excluded. Maintenance is ordinary upkeep, not a capital improvement. Deductible mortgage points and escrow funding are not modelled. Do not include refundable escrow deposits in buying fees.

There is no income input or affordability check. Both paths assume you can fund the more expensive monthly housing bill. The model also cannot price stability, flexibility, commuting, or the work of maintaining a home.

Common questions

Why is the equivalent rent not my mortgage payment?

A mortgage payment partly repays debt and builds equity. Ownership also ties up a down payment and brings fees, maintenance and taxes. Renting frees some money to invest. The threshold accounts for those differences, rather than just comparing monthly bills.

Why does the headline stay the same when I change my rent?

The headline solves for the rent that would make the paths equal. Your entered rent changes the two net-worth paths and their break-even year, not that solved threshold.

What does a zero equivalent rent mean?

Buying is at least as good even at zero rent under the selected assumptions. There is no positive rent threshold to show. This can happen when assumed home appreciation is very strong. It is a model result, not a guarantee.

Why can another calculator disagree?

Filing status, tax year, mortgage insurance, investment taxation, transaction timing and rounding all matter. This tool spells out its assumptions so you can see where a comparison differs. The default rate and market growth numbers are starting scenarios, not forecasts.