Why does buying sometimes lose in the short term?

Closing costs (typically 2-5% of the purchase price) are paid upfront and take years to recoup through equity building. If you sell within 2-3 years, renting is almost always cheaper when those costs are factored in.

What costs are not included?

This calculator omits closing costs, HOA dues, PMI (if applicable), tax deductions for mortgage interest, and the opportunity cost of the down payment invested elsewhere. Adding these would make the comparison more precise but also more complex.

Rent vs. Buy Calculator

The rent vs. buy decision is one of the biggest financial choices most people make. This calculator compares the net cost of buying a home (mortgage payments, taxes, insurance, maintenance, minus equity gained) against the cumulative cost of renting over the same period, accounting for home appreciation and annual rent increases.

How this calculator works

Cost to Buy (net) = Total payments made (down payment + monthly PITI + maintenance) minus equity accumulated at the end of the period. Equity = Home value at sale - remaining mortgage balance. Cost to Rent = Sum of monthly rent payments over the period, with rent increasing by the annual rate each year. The lower net cost determines which option is cheaper over the chosen horizon.

Formula reference: CFPB: Buying vs. renting a home

Example

Example: buying a $350,000 home with $70,000 down at 6.5% / 30 years vs. renting at $1,800/month (3% annual increase) over 7 years. If the home appreciates 3%/year, buying may be cheaper net of equity — but renting wins in the first 3-4 years when transaction costs dominate.

Frequently asked questions

Why does buying sometimes lose in the short term?: Closing costs (typically 2-5% of the purchase price) are paid upfront and take years to recoup through equity building. If you sell within 2-3 years, renting is almost always cheaper when those costs are factored in.
What costs are not included?: This calculator omits closing costs, HOA dues, PMI (if applicable), tax deductions for mortgage interest, and the opportunity cost of the down payment invested elsewhere. Adding these would make the comparison more precise but also more complex.

This calculator provides estimates for general informational purposes only and does not constitute financial, tax, or legal advice. Always confirm important numbers with a qualified professional or your lender/institution before making a decision.