Quick answer
Rent vs buy is decided mainly by how long you will stay. On a $425,000 home with 20% down at 6.75%, buying's net cost over 7 years is about $171,157, versus about $166,769 of rent starting at $1,800 a month — renting ahead by $4,388. At 3 years renting wins by $29,570; at 12 years buying wins by $63,223. There is no universal answer, only a break-even horizon.
How the Rent vs Buy Calculator works, step by step
Enter the home price, down payment, mortgage rate, expected years in the home, and the rent of a comparable place. The calculator totals the true cost of each path over that horizon — not the payments, the costs: for buying, the down payment, 2% buying costs, all monthly payments, tax, insurance and maintenance, and 6% selling costs, minus the equity you keep when you sell; for renting, the rent paid with annual increases plus renters insurance.
The result flips with the horizon because buying's heavy fixed costs — about 2% to buy and 6% to sell — are paid once, while its running costs are partly offset by principal repayment and appreciation. Short stays cannot amortise the transaction costs. On these figures the break-even year is year 8: renting is ahead through year 7, and buying pulls ahead by $5,714 in year 8, widening every year after.
Read the monthly figures alongside the net cost. Buying costs $3,098.98 a month all-in on these figures — $2,205.23 of principal and interest plus $389.58 of tax, $150 of insurance and $354.17 of maintenance — against $1,800 of rent. The monthly cash outflow of buying is far higher even when the net cost is close, because much of the mortgage payment builds equity you recover at sale.
Appreciation is the swing input. The comparison assumes 3% a year, which lifts the home from $425,000 to $522,696 over 7 years — $97,696 of gain that buying keeps. At 0% appreciation that gain vanishes and buying's net cost rises by roughly that amount, making renting the clear winner; at 5% buying wins comfortably. Appreciation is the one input nobody can forecast, so run the 0% case before deciding.
Know what the tool does not count. It does not assign an opportunity cost to the $85,000 down payment sitting in the house instead of invested, and it does not count mortgage interest tax deductions — for 2026 the standard deduction is $16,100 single and $32,200 joint, so most buyers get no deduction benefit anyway. Both omissions tilt the comparison slightly toward buying; the break-even year is an estimate, not a promise.
The formula
Net cost of buying = down payment + buying costs (2% of price) + all monthly payments + tax, insurance and maintenance + selling costs (6% of sale price) − (sale price − remaining loan balance). Net cost of renting = sum of rent over the horizon with annual increases, plus renters insurance.
Worked example — try it on the calculator above
Worked example: $425,000 home vs $1,800 a month rent, 7 years
Buy: $85,000 down, $340,000 loan at 6.75% (payment $2,205.23), $8,500 of buying costs, and $3,098.98 a month all-in. Over 7 years you pay $260,314 in monthly costs; the home appreciates to $522,696 at 3% a year, and after 6% selling costs and clearing the $308,677 remaining balance you recover $182,657. Net cost of buying: $171,157. Rent at $1,800 a month rising 3% a year, plus $15 a month of renters insurance, totals $166,769. Verdict for this horizon: effectively even, with renting ahead by $4,388 — extend the stay to 8 years and buying takes the lead.
Frequently Asked Questions
What is the 5% rule for rent vs buy?
A shortcut from Canadian planner Ben Felix: estimate the annual unrecoverable cost of owning as about 5% of the home's value (roughly 1% tax, 1% maintenance, 3% cost of capital). If you can rent a comparable home for less than that per year — $21,250 on a $425,000 home, or $1,771 a month — renting is financially competitive. It is a screening rule, not a substitute for the full calculation.
Isn't rent just throwing money away?
No — rent buys housing, exactly as the interest, tax, insurance and maintenance portions of a mortgage payment do. Only the principal portion of a mortgage payment builds wealth, and early in a loan that portion is small: on the example loan, about $293 of the first $2,205 payment. The honest comparison is unrecoverable cost versus unrecoverable cost, which is what this calculator does.
How much does home price appreciation change the answer?
More than any other assumption. At 3% a year the example home gains about $97,700 over 7 years; at 0% it gains nothing and buying's net cost rises by roughly that amount, making renting the clear winner; at 5% buying wins comfortably. Appreciation is the one input nobody can forecast, so run the 0% case before deciding.
How long do I need to stay for buying to pay off?
At current rates and typical transaction costs, the break-even horizon is commonly 5 to 7 years, longer when rates are high or rent is cheap relative to prices, shorter when rent is high. On these figures it is year 8. If there is a realistic chance of moving within 3 years — job, family, city — renting is usually the financially safer choice.
Estimates, not advice. This calculator provides educational estimates based on the inputs you enter and the assumptions shown on this page. It is not financial, tax or investment advice, and it cannot see your full situation. Verify important figures against official sources, and consider a qualified professional for decisions about your own money. See our Disclaimer and Methodology.