What is a Rent vs Buy Calculator?
A rent vs buy calculator determines whether renting or buying a home is financially better for your specific situation over a given time horizon. The answer depends on local home prices, rent levels, mortgage rates, down payment, time you plan to stay, opportunity cost of the down payment, and your tax situation. There is no universal answer — this calculator runs the numbers for your specific inputs.
Key Factors in the Rent vs Buy Decision
- Price-to-rent ratio: Divide median home price by annual rent for comparable units. Under 15: buying favours. 15–20: neutral. Above 20: renting may be better. Many coastal US cities (SF, NYC, LA) have ratios of 25–40.
- Break-even horizon: Buying has high upfront costs (3–6% closing costs, down payment). These costs take years to recover. If you plan to move within 3–5 years, renting often wins mathematically.
- Opportunity cost: A $60,000 down payment invested in index funds could grow to $155,000 in 10 years (8% return). This foregone growth is the real cost of a down payment, often ignored in buy calculations.
- Flexibility value: Renting provides mobility for career opportunities. Owning ties you to a location. In dynamic labor markets, this flexibility has real economic value.
Is buying always better than renting long-term?
Not necessarily. The "renting is throwing money away" argument ignores that renters are also not paying property taxes (0.5–2.5% of home value/year), maintenance (1–2%/year), HOA fees, mortgage interest (substantial in early years), and the opportunity cost of the down payment. A renter who invests the down payment and the monthly savings (when rent < PITI) in index funds often accumulates comparable or greater wealth than a homeowner over 30 years, depending on location.
What is PITI and how does it affect the rent vs buy comparison?
PITI = Principal, Interest, Taxes, Insurance — the total monthly cost of homeownership. On a $400,000 mortgage at 7%, PITI is approximately: P+I $2,661 + property tax ($500/month avg) + homeowner's insurance ($150/month) = ~$3,311/month minimum. Add maintenance reserves (1% of value = $333/month) = ~$3,644/month total true cost. If comparable rent is $2,500/month, the renter has $1,144/month extra to invest.
How do the mortgage interest and property tax deductions affect the comparison?
The 2017 Tax Cuts and Jobs Act significantly reduced the tax benefit of homeownership for most buyers: the standard deduction increased to $30,000 (MFJ, 2025), SALT deduction capped at $10,000, and mortgage interest deduction limited to loans up to $750,000. Most homeowners no longer benefit from itemising — only those with very large mortgages in high-tax states are likely to exceed the standard deduction. Do not rely heavily on tax deductions when evaluating the buy vs rent decision.
Last Updated: March 2026 · For US audiences