Rent vs. Buy Calculator
Compare the net wealth outcome of renting vs. buying a home over your expected stay, using the invest-the-difference method — see the numeric differential and break-even year, not an opinion.
Calculator Inputs
Sets the currency this calculator's numbers are denominated in. This is presentation only — it does NOT convert your numbers between currencies, it only changes how they're formatted.
100% means an all-cash purchase with no mortgage.
The return the renter is assumed to earn investing the cash they didn't spend on a down payment/closing costs, plus any month a renter's costs are lower than a buyer's that year.
- Net Wealth Differential (Buying − Renting, End of Stay)
- -$33,186.62
- Break-Even Year (Buying Catches Up)
- No break-even within the selected period
- Initial Cash Outlay (Down Payment + Closing Costs)
- $88,000.00
- Status
Year-by-Year Rent vs. Buy Comparison
All 7 years of the modeled stay.
| Year | Home Value | Mortgage Balance | Annual Rent Cost | Annual Owning Cost (excl. principal) | Buyer Net Wealth (if sold) | Renter Net Wealth (portfolio) | Net Wealth Differential |
|---|---|---|---|---|---|---|---|
| 1 | $412,000.00 | $316,423.24 | $24,000.00 | $30,594.68 | $70,856.76 | $103,451.44 | -$32,594.68 |
| 2 | $424,360.00 | $312,606.96 | $24,720.00 | $30,607.16 | $86,291.44 | $119,361.97 | -$33,070.53 |
| 3 | $437,090.80 | $308,535.08 | $25,461.60 | $30,611.12 | $102,330.27 | $135,745.09 | -$33,414.82 |
| 4 | $450,203.52 | $304,190.51 | $26,225.45 | $30,605.78 | $119,000.80 | $152,614.70 | -$33,613.90 |
| 5 | $463,709.63 | $299,554.97 | $27,012.21 | $30,590.18 | $136,332.08 | $169,985.09 | -$33,653.01 |
| 6 | $477,620.92 | $294,608.97 | $27,822.58 | $30,563.35 | $154,354.69 | $187,870.97 | -$33,516.28 |
| 7 | $491,949.55 | $289,331.75 | $28,657.26 | $30,524.26 | $173,100.83 | $206,287.45 | -$33,186.62 |
Net Wealth Differential Over Time
Buyer net wealth minus renter net wealth, year by year. Positive values mean buying leaves more net wealth under these assumptions; the year this first crosses zero (if it does) is the break-even year.
About these results
CalcSpectrum calculators produce automated estimates using established formulas and the specific values you enter. Because real-world outcomes depend on input accuracy, mathematical assumptions, and rounding conventions, please verify critical figures with an appropriately qualified financial, tax, medical, legal, or other professional, as relevant.
Financial Notice: These figures are informational estimates for personal planning only. They do not constitute financial, investment, tax, or legal advice, nor do they represent a lending offer or credit approval. Provider and financial institution figures, rates, fees, and underwriting requirements may differ.
How It's Calculated
Formula
This calculator uses the 'invest the difference' method: both renting and buying start from the same cash (a buyer's down payment plus closing costs) — the buyer puts it into a home, the renter invests it. Each year after that, whichever option costs less has the difference credited into (or, if renting costs more that year, drawn out of) the renter's investment portfolio, so the comparison always reflects the exact same total cash flow either way. The buyer's annual cost is mortgage interest (reusing this project's amortization engine — principal isn't a 'cost', it becomes home equity) plus property tax, insurance, and maintenance; the renter's annual cost is that year's rent. At the end of each year, the buyer's net wealth is home value minus remaining mortgage balance minus selling costs (as if sold that year), and the renter's net wealth is their investment portfolio. The net wealth differential and the break-even year (the first year buying's net wealth catches up to renting's) are the two BRD-required outputs — this calculator never labels one option 'better', only reports the numeric comparison for the exact assumptions entered.
Worked Examples
All-cash purchase, zero costs, 1-year check (fully worked)
- $100,000 home, 100% down (no mortgage), 5% appreciation → home value after 1 year: $105,000
- Buyer's cash cost this year: $0 (no mortgage, no tax/insurance/maintenance in this simplified example)
- Renter invests the $100,000 they didn't spend at 10%: grows to $110,000, then pays $500/month × 12 = $6,000 rent out of that same pool → $104,000
- Net wealth differential: $105,000 − $104,000 = $1,000 (buying slightly ahead after 1 year, under these exact numbers)
Frequently Asked Questions
Why doesn't this just say 'renting is better' or 'buying is better'?
Because that would be an unsupported opinion — the actual answer depends entirely on the assumptions you enter (appreciation, mortgage rate, how long you stay, investment returns). This calculator reports the numeric net wealth differential and break-even year for YOUR entered assumptions instead.
What does 'no break-even within the selected period' mean?
It means that, under your entered assumptions, buying's net wealth never catches up to renting's within the number of years you plan to stay — not that it never would with a longer horizon, and not a fabricated year.
Why is mortgage principal excluded from 'annual owning cost'?
Principal payments aren't a cost in the net-wealth sense — they convert cash into home equity, which is already captured in the buyer's net wealth (home value minus remaining mortgage balance). Only interest, tax, insurance, and maintenance are treated as pure costs comparable to rent.
Can the renter's portfolio go negative? What does that mean?
Yes, if owning is cheaper than renting almost every year, the model treats the shortfall as a signed counterfactual wealth ledger — the same growth rate compounds a negative balance the same way it compounds a positive one. This is a modeling device to keep the comparison consistent, not a claim that a renter would carry a real brokerage debit balance.
What is the 'investment return rate' actually modeling?
It's the return the renter is assumed to earn on the cash they didn't put into a home purchase, plus any year their actual housing costs are lower than the buyer's. This is the standard 'invest the difference' assumption used by most public rent-vs-buy comparisons, and it can materially change the result — try a range of values.