What is this?
A rent vs buy calculator compares the total 5-year cost of renting versus buying a home, including mortgage payments, property taxes, insurance, maintenance, opportunity costs, and home appreciation. The 5% rule is a quick estimate: if annual rent is less than 5% of the home price, renting is usually cheaper; if more than 5%, buying may be better. Opportunity cost is a key factor—money used for a down payment could alternatively be invested in the stock market, and this calculator accounts for that alternative investment return.How to use
Enter home purchase details (home price, down payment percentage, mortgage interest rate, annual property tax rate, annual home insurance, annual HOA fees, and monthly maintenance), add rental costs (monthly rent, expected annual rent increase, annual renters insurance), set assumptions for home appreciation rate (typically 3-4% annually) and investment return if you invested the down payment instead (typically 7-10% for index funds), and review the 5-year comparison showing net position including equity built, home appreciation, and opportunity costs.Tips
- **5-Year Horizon**: Buy if you plan to stay 5+ years. Sell sooner, and closing/transaction costs hurt returns
- **Opportunity Cost**: Down payment invested at 7-10% can outperform slow real estate markets (2-3% appreciation)
- **Hidden Costs**: Buying includes property tax, insurance, HOA, and 1% maintenance. Renting has fewer surprise costs
- **Break-Even Timing**: If break-even is 7+ years and you might move in 5 years, renting is safer
- **Market Timing**: High interest rates (7%+) favor renting. Low rates (3-4%) favor buying
- **Closing Costs**: Buying costs 2-5% to close. Selling costs 6-10% (realtor fees). Total transaction cost: 8-15%
Disclaimer: This calculator provides estimates for informational purposes only and does not constitute financial advice. Actual results may vary based on lender terms, market conditions, and individual circumstances. Consult a qualified financial advisor before making financial decisions. See our full disclaimer for details. 