Rent vs Buy Calculator
Year-by-year breakeven and net worth comparison
Last updated: November 2025 · SALT cap and mortgage interest cap per 2026 OBBBA rules
Buy Scenario
Rent & Assumptions
For mortgage interest and SALT deduction value
Net Worth Over Time
Annual Cost Comparison
Year-by-Year Detail
| Yr | Home Value | Equity | Buy NW | Rent NW | Advantage |
|---|---|---|---|---|---|
| 1 | $412,000 | $95,251 | $70,531 | $102,997 | $-32,466 |
| 2 | $424,360 | $111,096 | $85,635 | $116,316 | $-30,682 |
| 3 | $437,091 | $127,565 | $101,339 | $129,968 | $-28,629 |
| 4 | $450,204 | $144,685 | $117,673 | $143,959 | $-26,287 |
| 5 | $463,710 | $162,489 | $134,666 | $158,301 | $-23,635 |
| 6 | $477,621 | $181,008 | $152,351 | $173,002 | $-20,651 |
| 7 | $491,950 | $200,278 | $170,761 | $188,073 | $-17,312 |
| 8 | $506,708 | $220,335 | $189,932 | $203,525 | $-13,593 |
| 9 | $521,909 | $241,217 | $209,903 | $219,368 | $-9,465 |
| 10 | $537,567 | $262,967 | $230,713 | $235,615 | $-4,902 |
Round-trip transaction costs are the silent killer
Buying typically costs 2-3% in closing (lender, appraisal, title, escrow). Selling typically costs 6% agent commission plus 1-2% in concessions. That is 9-11% of the home value gone just to complete a buy-then-sell cycle. On a $400,000 home, that is ~$40,000. Your appreciation has to cover that before buying is "ahead." This is why the 5-year rule of thumb exists.
How the Rent vs Buy Math Works
The Two Scenarios
Buy: You put the down payment and closing costs into the home, pay PITI plus maintenance every year, and the home appreciates at your assumed rate. Net worth if you sold today = sale proceeds (home value minus selling cost) minus mortgage balance. Rent: You invest the down payment and closing cost at your assumed return, pay rent (rising each year by rent inflation), and invest the savings versus buying. Net worth = your invested portfolio.
Opportunity Cost of the Down Payment
An $80,000 down payment invested at 5% becomes ~$130,000 in 10 years. If you put that into a home instead, the home equity has to grow by at least that much just to keep up. This is why low-down-payment loans (3% FHA) can sometimes win the math against 20% down: less capital tied up in the asset means more invested at a market return.
Tax Benefits (Post-OBBBA)
Mortgage interest is deductible on up to $750,000 of acquisition debt (TCJA cap, kept permanent by OBBBA). State and local taxes including property tax are deductible up to $40,400 for 2026 under OBBBA, phasing down to $10,000 by 2030. These only matter if your itemized deductions beat the 2026 standard deduction ($16,100 single / $32,200 MFJ). The calculator applies your marginal tax rate to mortgage interest plus capped property tax as an upper-bound tax benefit, the real number is often lower because many buyers take the standard deduction anyway.
Why Rent Can Win at High Price-to-Rent Ratios
When home prices are high relative to rent (price-to-rent ratio above 20), the cost of carrying the home (interest + tax + insurance + maintenance) often exceeds the equivalent rent. In that environment the renter pays less every month AND has the down payment invested at a market return. Buying only catches up if home appreciation outpaces stock returns by a lot, which historically has not been the case in expensive metros. The calculator above lets you test your local ratio directly.
Frequently Asked Questions
What is the "5-year rule" for buying a home?
Plan to stay 5+ years to break even on round-trip transaction costs (8-12% of home value: closing on the buy, 6% agent commission plus concessions on the sell). Sell sooner and appreciation usually has not covered the costs.
How is the breakeven year calculated?
It's the first year buyer net worth (sale proceeds after selling cost minus mortgage balance) exceeds renter net worth (down payment + savings invested at the assumed return).
What is opportunity cost?
The return you give up by tying capital into a home instead of investing it. At 5% returns, an $80k down payment becomes ~$130k in 10 years, your home equity has to grow at least that much to keep pace.
What hidden costs of buying surprise people?
Round-trip transaction costs (~10%), maintenance (1-2%/yr), rising property tax, insurance spikes (CA, FL, LA, TX 2023-2025), HOA escalation, special assessments. "Mortgage less than rent" usually omits all of these.
What tax benefits do homeowners get?
Mortgage interest deductible up to $750k of acquisition debt (TCJA, permanent under OBBBA). SALT including property tax deductible up to $40,400 for 2026 under OBBBA (phasing down to $10k by 2030). Only helps if itemized > standard deduction.
When is renting actually better?
High price-to-rent ratio (above 20), short horizon (under 5 years), aggressive investor with long horizon, high-property-tax state where PITI dwarfs rent, or when flexibility is worth more than equity.