Guide

Step-by-step guidance to help you use the Rent vs Buy calculator.

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How this Calculator Works (long version)

This calculator helps you compare renting a home and buying a home to see which one costsmore or less money over time.

Instead of only looking at the monthly payment, it adds up all the money that goes in and out while you live there from the day you move in to the day you move out.

At the end, it answers one main question:

“After everything is done, how much money did it cost?”

This calculator compares renting and buying by using the numbers you enter to estimate how much money you would spend over time in each case. You enter things like home price or rent, how long you plan to stay, mortgage information, taxes, and expected investment returns. Some inputs arepre-filled with reasonable defaults to make things easier if you're not sure what to enter. You can always change them.

Buying

For buying, the calculator uses inputs such as home price, down payment, mortgage rate, property taxes, insurance, maintenance, home value growth, inflation rate, and selling costs to estimate monthly payments, total ownership costs, and how much money you might get back if you sell the home.

Renting

For renting, it uses monthly rent, rent increases, security deposit, broker fees (if any), and renter's insurance to estimate total rental costs and the deposit you may get back at the end.

It also uses your federal income tax rate, investment tax rate, tax filing status, tax deductible expenses, and return on investment rate to estimate tax effects and missed investment gains. Finally, it adds up all costs, subtracts money you get back, and shows the Total Cost for renting and buying using the same rules for both, so the comparison stays fair.

If you want to see exactly how the math works, you can click the View Detailed Analysis button to view tables that break down the calculations step by step. This is optional and mainly for users who want to look “under the hood.”

What does “Total Cost” mean?

Total Cost means the total amount of money it costs you over the time you choose.

It includes:

  • Money you pay at the start (like deposits or down payments)
  • Money you pay each month or year (rent, mortgage, taxes, insurance, repairs)
  • Money you don't get to use because it's tied up somewhere else
  • Minus any money you get back at the end

Think of it like this: How much money did it cost to live here for this many years?

The option with the lower Total Cost is cheaper.

What is “Missed Investment Gains”?

Missed investment gains or opportunity cost is a fancy way of saying: “What could this money have done instead?” Money can usually only be used in one place at a time.

When renting costs less than buying, the renter has extra money left over each month. That extra money can be invested and grow over time. At the same time, buying costs more each month, which means the buyer has less money available to invest and misses out on that same growth.

Missed investment gains measures this missed investment growth for both renting and buying. When calculated using the same investment assumptions, this produces the same result as investing the monthly difference between rent and buy costs.

In simple terms, the renter's investment gains and the buyer's missed investment growth come from the same dollars so both methods lead to the same outcome.

What does “Missed Investment Gain” for buying mean?

When you buy a home, you spend money in many ways, not just at the start, but every month. This includes yourdown payment, closing costs, mortgage payments, property taxes, insurance, and repairs. Once that money is spent, it can't be invested anymore.

The calculator adds up all of this spending and asks: “If this money had been invested instead, how much could it have grown?”The missed growth is shown as the missed investment gain of buying.

Example

If you spend $1,000 on home costs (like part of a mortgage payment, taxes, or repairs), that $1,000 is gone and can't be invested. If that $1,000 could have earned 5% per year (the Investment Return Rate), it might grow to about $1,276 after 5 years. The extra $276 is the missed investment gain of buying for that $1,000.

What does “Missed Investment Gain” for renting mean?

When you rent, you also spend money that can't be invested anymore. This includes your security deposit, any broker's fee, monthly rent, and renter's insurance.

The calculator adds up these rent-related costs and asks the same question: “If this money had been invested instead, how much could it have grown?”This is shown as the missed investment gain of renting. It's included so renting and buying are compared using the same rules.

It does not mean renters always invest in the stock market. It just shows what could happen.

Example

If you spend $1,000 on rent and renter's insurance, that $1,000 is gone and can't be invested. If that $1,000 could have earned 5% per year(the Investment Return Rate), it might grow to about $1,276 after 5 years.

The extra $276 is the missed investment gain of renting for that $1,000. The calculator treats every dollar spent the same way, whether it's spent on renting or buying, so the comparison stays fair.

What does “Money You Get Back” mean?

Net proceeds means money you get back at the end of the period. In this calculator, all costs are shown as positive numbers, so when you receive money it is shown as a negative number to reduce your Total Cost.

For buying, money you get back is usually negative because when you sell your home you often receive cash after paying off the remaining loan, closing costs, and any taxes. That leftover cash reduces how much the home really cost you.

For renting, money you get back is usually shown as negative because you're expected to get your security deposit back when the lease ends.

How does the calculator use tax assumptions?

Taxes can change the real cost of renting and buying, so this calculator includes a simple, transparent way to estimate them using the tax inputs you see.

Federal Income Tax Rate

Enter your federal income tax rate as a percentage. This number is used to estimate how much certain ongoing homeownership costs are reduced by tax deductions. When you own a home, parts of your ongoing monthly costs, mainly mortgage interest and property taxes, may lower your taxable income. A higher federal tax rate means those deductions are more valuable and reduce the true cost of owning each month. A lower tax rate means the savings are smaller.

The calculator applies your federal tax rate to these deductible costs to estimate after-tax ownership costs. This helps make the monthly and yearly cost of buying more realistic when compared to renting. If the default 25% in the calculator is not good enough, you can look up your marginal tax bracket on the IRS website.

Investment Tax Rate

This is the tax rate applied to investment gains (capital gains) in the missed investment gains and net proceeds calculations. It's used to estimate after-tax returns so investment gains aren't overstated. If the default 15% is not appropriate, refer to the IRS and your State tax authority for capital gains rates.

Filing Status

The calculator assumes a single, consistent filing status for the comparison. Filing status affects the standard deduction and whether itemizing provides a benefit, so it changes how much value you get from mortgage interest and property tax deductions.

Other Itemized Deductions

Some people already have itemized deductions not related to the home (charitable donations, medical expenses). The calculator assumes any existing deductions are already built into your tax situation and only considers the additional deductions caused by owning a home. This prevents overstating the tax benefits of buying.

Adjusted Gross Income (AGI)

Your AGI matters because higher incomes (over $500,000 per year) can reduce or cap certain tax benefits like the SALT deduction. The calculator adjusts the SALT cap based on your AGI to better estimate tax benefits.

State Income Tax

Enter the dollar amount of state (and local) income tax you pay in a year, not a percentage. This should be the amount shown on your last year's federal return or an estimate (taxable income × state rate). For example, if your taxable income is $80,000 and your state tax rate is 5%, enter $4,000. If your state has no income tax, enter $0.

This input is used to estimate how state/local taxes affect the federal tax benefits of homeownership, since the SALT deduction and your total tax situation influence how much value you get from homeowner deductions.

What are the financial considerations for renting a home vs buying a home?

Renting a home

  • Easier relocation and flexibility: renting lets you move more easily, useful if your job or plans may change.
  • Lower money up front: renting doesn't require a large down payment or closing costs, freeing funds for other uses.
  • Fewer surprise bills: landlords usually handle repairs and maintenance.
  • Simpler monthly budgeting: rent is generally more predictable than property taxes or maintenance.

Buying a home

  • Building ownership value: payments build equity and the home may appreciate over time.
  • More predictable housing payments: a fixed-rate mortgage keeps principal & interest stable.
  • Potential tax savings: mortgage interest and property tax deductions can reduce taxable income.
  • Part of a broader wealth strategy: homeownership can be one element of long-term financial planning.

What are the quality of life considerations for renting a home vs buying a home?

Renting a home

  • Less work and stress: landlords or property managers typically handle maintenance, repairs, taxes, insurance adjustments, and HOA fees, which can save time and mental energy.
  • More freedom to move: renting makes it easier to change where you live without selling a house or paying big fees.
  • Protected from market changes: renters are insulated from housing market ups and downs, which can be appealing during volatile markets.

Buying a home

  • Long-term sense of stability: owning a home generally provides stability and more control over your housing situation.
  • Freedom to make the space your own: homeowners can renovate, decorate, and personalize without needing permission.
  • Support for long-term lifestyle goals: buying can align with family planning or retirement and the emotional value of ownership.

Why does buying sometimes cost more even if the home goes up in value?

Buying a home has many extra costs: repairs, property taxes, insurance, fees when you buy, andfees when you sell. If you don't stay very long, these costs can be more than the money you gain from the home going up in value.

Home price growth also varies by location and time: some years prices rise a lot, some years they grow slowly, and sometimes they fall. The calculator uses the home price growth rate you enter to estimate how much the home might be worth when you sell.

If home prices grow slowly (or not at all), the value you gain from owning may not cover ownership costs. Over longer periods, higher home price growth can help buying look better, but over short periods those extra costs often outweigh gains. That's why buying doesn't always win, especially over short stays.

Tiny Example

Suppose you buy a $400,000 home and stay for 3 years. If the home grows2% per year, it might be worth about $425,000 — roughly a$25,000 gain.

But if buying and selling costs, taxes, insurance, and repairs add up to$40,000, you still come out behind, even though the home went up in value.

Generally, when is it better to rent a home vs buy a home?

Buying a home tends to make more sense when both financial and life situation factors line up. This calculator helps you test both rent and buy options side by side, but the results make the most sense when you compare them against the checklist below.

When renting may make sense

  • You expect to move within a few years:Renting often wins over short time periods. Use the calculator to see how buying performs if you sell after 1-3 years.
  • You live in a high-cost area (HCOL/VHCOL):In many expensive markets the cost to buy is much higher than renting a similar home, which can make owning more expensive over short horizons.
  • You want flexibility for career growth: renting makes it easier to change jobs or locations.
  • You're focused on saving or building income first: renting can free cash for investments or debt repayment.
  • You prefer not to deal with repairs and maintenance: landlords usually handle those responsibilities.
  • You are disciplined about investing your savings: renting's advantage depends on actually investing the difference rather than spending it.

When buying may make sense

  • You plan to stay put for several years: long time horizons spread upfront and selling costs and give appreciation time to matter.
  • You value stability over flexibility: ownership provides predictability and control over your housing.
  • You can afford the monthly costs comfortably: realistic inputs in the calculator help verify affordability.
  • You're prepared for repairs and surprises: higher maintenance expectations can be modeled with the maintenance percentage.
  • You are not relying on high home price growth: buying is safer when it works with conservative growth assumptions.
  • You benefit from “forced saving”: mortgages can help build equity and encourage regular saving.

How to use the calculator with this checklist

  • Enter numbers that match your current situation, not best-case scenarios.
  • Try adjusting one variable at a time: length of stay, home price growth, or investment return assumptions.
  • If buying only wins under very optimistic assumptions, renting may be the safer choice for now.

Important things to remember

This calculator does not predict the future. It just shows what might happen if your guesses come true.

Changing numbers like years staying or home price growth can change the result a lot.

Money is not the only thing that matters. Comfort, freedom, and happiness are important too.

Tips

  • Adjust the expected home price growth and selling costs to match your market.
  • Consider opportunity cost for down payment and closing costs.
  • Use the printable report feature to save your inputs and results.
Need more help? Contact support.