Rent vs. Buy Calculator
Compare renting vs. buying a home over time. Model home appreciation, mortgage paydown, rent increases, and opportunity cost to see which builds more wealth — with a side-by-side equity chart.
How to use this tool
- Enter home price, down payment, mortgage interest rate, current monthly rent, annual home appreciation, annual rent increase and years to compare in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your buy scenario equity and the full breakdown beneath it.
Whether buying or renting is better depends on local prices, mortgage rates, home appreciation, and what renters do with the money they don't tie up in a down payment. This model compares wealth accumulation, not just monthly costs.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
Monthly mortgage payment: PMT = Loan × r(1+r)n / ((1+r)n − 1) where r = monthly rate, n = total months
Buy equity at any point: Home Value − Remaining Loan Balance
Rent savings added when monthly renting cost < monthly buying cost: Rent Savingsm+1 = Rent Savingsm + max(0, Buy Cost − Rent Cost)
How it works
The calculator runs a month-by-month simulation comparing two scenarios. In the buy scenario, a standard amortising mortgage is used; the home appreciates at the chosen annual rate and equity is home value minus remaining balance. In the rent scenario, the down payment is treated as an initial lump sum; whenever the all-in buying cost (mortgage + assumed 1% annual maintenance) exceeds rent, the difference is added to the renter's savings pool.
Opportunity cost on the renter's savings is not compounded in this model, and no transaction costs (stamp duty, agent fees, closing costs) are included. Results are illustrative and sensitive to the appreciation and rent-growth assumptions chosen.
Worked example
- Home price: $120,000. Down payment: 100% (no mortgage). Mortgage rate: 0%. Annual appreciation: 0%. Years: 1.
- With a 100% down payment the loan is $0, so there is no mortgage balance to pay down.
- After 1 year the home value is still $120,000 (0% appreciation), and the remaining balance is $0.
Buy scenario equity after 1 year: $120,000.
Common mistakes to avoid
- Omitting transaction costs (closing costs ~2-5%, agent commissions ~5-6%) from the buy side, which can erase apparent equity gains for short holding periods.
- Setting rent increases to 0% and home appreciation to a high rate, systematically biasing the model toward buying — use realistic matched assumptions for both.
- Ignoring homeowner costs such as maintenance (~1% of value per year), insurance, and HOA fees that renters do not pay.
Key terms
- Amortisation
- The gradual repayment of a loan through regular fixed payments that cover both interest and principal.
- Home equity
- The portion of the home's current market value that the owner actually owns, i.e. value minus outstanding mortgage.
- Opportunity cost
- The potential return foregone by using money for a down payment rather than investing it elsewhere.
- Rent-to-own crossover point
- The year at which the buyer's accumulated equity exceeds the renter's invested savings.
- Annual appreciation
- The expected percentage increase in home market value per year.
Frequently asked questions
- What costs are not included?
- This model excludes property taxes, maintenance (~1% of home value/year), HOA fees, insurance, and transaction costs. Add these to the buy side for a more complete comparison.
- When does buying always win?
- In high-appreciation markets with long time horizons, buying typically dominates because leverage amplifies gains. Renting wins in stagnant markets when renters invest the difference aggressively.