Rent vs. Buy Calculator

Is it better to buy or to rent an apartment? Use RentCafe’s free calculator to find out whether a mortgage or renting better fits your situation.

Renting

Buying

Summary (Year 1 to )

Rent Buy
Average net cost per month
Total net cost
Cost breakdown
Initial costs
Yearly costs over 1 to
Lost opportunity cost until year
Selling costs N/A
Total costs
Total net cost
Show cost breakdown

How to use this calculator: All the info you need

Fill in the calculator fields with your information. Click the ‘Advanced’ button to expand the calculator if you want to provide additional information such as closing costs and other fees. This will increase the accuracy of the result.

Check out the resulting interactive graphic to see the breakdown of monthly costs for each year.

Are you better off renting or buying a home? This calculator will give you an estimate for your specific situation to compare whether it's better to rent an apartment or buy one. What we need for this is:

  • The location where you plan to live
  • The approximate price of the home you would purchase
  • How much is your down payment
  • The monthly rent you would pay if not buying
  • Your approximate credit score

If you have additional information, you can help the calculator be more accurate. For the advanced option, you can provide:

  • The annual interest rate
  • The number of years for the loan
  • The number of years you plan on staying in the home
  • The property tax rate in your area
  • The monthly cost of homeowner’s insurance
  • The home value appreciation rate
  • Closing costs
  • An estimated budget for maintenance and repairs & estimated monthly HOA fees
  • The monthly cost of renter’s insurance
  • The rent appreciation rate
  • The security deposit
  • The expected investment return rate
  • Inflation rate
  • Your income tax rate and tax filing status
  • Tax deductions
Disclaimer

Glossary: All the terms you need to know, explained

The mortgage interest rate is what it costs you to borrow money. It represents a percentage reflecting the additional money you will pay to the lender of your loan, in addition to the borrowed amount. The interest rate can be fixed, or it can vary throughout the life of the loan. For this calculator, we consider only fixed rates.

The down payment is part of the cost of a home that you pay upfront when purchasing it. The larger the down payment, the lower the amount to be borrowed, and generally this is reflected in better terms for the mortgage.

A loan term is the duration over which a borrower agrees to repay a loan. Typical durations for home loans are 15 and 30 years, but some borrowers also offer 20 years or custom terms. The loan term impacts the monthly payment amount, and how much interest is paid over time. (The longer the term, the lower the monthly payment, but the higher the accumulated interest.)

A property tax rate is the percentage that local governments tax the value of a property. It is paid by the owner of the property and it varies depending on the value of the property and the location.

This is a form of property insurance that covers potential damages to the property in case of fire, natural disasters, etc., as well as liability coverage for accidents that may occur within the house. Different policies include different coverage ranges, which can reduce or increase the cost of the policy. This cost will also vary depending on the size, location, and value of the property.

Buying closing costs are various fees and expenses that a buyer must pay at the closing of a real estate transaction, in addition to the price of the property. These costs can include loan origination fees, title insurance, appraisal fees, attorney fees, inspection fees, and other related expenses.

Selling closing costs are the expenses a seller has to pay when completing a real estate transaction. These costs can include real estate agent commissions, attorney fees, title insurance fees, transfer taxes, and other miscellaneous expenses related to the sale of the property.

Homeowners Association fees are regular payments made to the Homeowners Association that cover maintenance and service on common expenses in the community. HOA fees are set by the Homeowners Association and can vary based on the size and type of community and the services provided.

This is the rate at which the value of a property increases over time. It can be influenced by various factors, including the location of the home, local real estate market trends, economic conditions, and improvements made to the property.

The rent appreciation rate refers to the rate at which rental prices for properties increase over time. This rate can be influenced by various factors, including the local real estate market, economic conditions, demand for rental properties, and inflation.

A security deposit is a refundable sum of money (equivalent to one or two months’ rent) paid by a tenant to a landlord before moving into a rental property. This serves as financial protection for the landlord against potential damage to the property, unpaid rent, or other contractual breaches by the tenant. If none of these issues occur, the deposit is generally refunded in full at the end of the lease.

This is a type of insurance policy that provides coverage for tenants living in a rental property. It's paid on a monthly basis and typically covers personal property against risks like theft, fire, and vandalism, and it can also include liability protection for accidents that happen inside the rental property.

The marginal income tax rate is the percentage of tax applied to your income for each tax bracket in which you qualify. In many tax systems, income is divided into segments known as brackets, and each bracket has a corresponding tax rate. The marginal rate is the rate on the highest dollar of income earned.

Inflation rates reflect the decline of purchasing power over time and the increase in overall prices for goods and services. It is generally expressed as a percentage.

The investment return rate is a measure of the gain or loss generated on an investment, relative to the initial amount of money invested. It is generally expressed as a percentage.

A tax filing status is a category that defines the type of tax return form you should use when filing your taxes. It largely depends on the taxpayer's marital status and family situation. Each status has different tax rates and can affect the amount of tax and deductions available.

Tax deductions are specific expenses that taxpayers are allowed to subtract from their gross income, reducing the total taxable income. There are two types of deductions: standard and itemized. The standard deduction is a fixed amount, while itemized deductions are specific expenses that can be listed individually.

Methodology

The RentCafe rent vs. buy calculator is populated with initial estimates based on national or state averages. You can personalize the input to fit your situation.

For renting costs, the calculator arrives at a monthly estimate by taking into account the monthly rent, security deposit, and the cost of renters’ insurance. For an accurate estimate over the years, the calculator includes inflation rate and rental appreciation rate adjustments.

To estimate the yearly cost of homeownership, the calculator considers both initial and recurring expenses. The initial expenses include the down payment and the closing costs. Recurring expenses include the monthly mortgage payment, property taxes, insurance, and maintenance costs.

The monthly mortgage payment includes both the principal and interest payments, depending on the duration of your loan and the interest rate. The maintenance and additional costs such as insurance or HOA fees are adjusted for rate of inflation over the years.

The property tax is adjusted based on the property’s value, for which we consider a standard home value appreciation rate, estimated by state. For the final estimate, the calculator assumes tax deductions for mortgage payments and property taxes. Both the renting and the homeownership estimates include an opportunity cost for potential returns on investments. This opportunity cost represents the potential gains of all the expenses you had, should you have chosen not to rent or buy.

Helpful Calculators for Renters

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Other factors to consider for your decision:

The decision to rent or buy a place is highly individual, including intangible factors that only you can know for sure. Our calculator gives you an estimate for the financial side of the decision, but we wanted to also highlight a few other factors that play a role. Below are some of the questions you should ask yourself before deciding:

If you are not yet set on putting down roots where you live now, renting will offer more flexibility to move, should you need to. The option to end your lease and move to a new rental allows for changes in your lifestyle.

Owning your home means being able to deal with whatever repair and maintenance job comes your way. Consider setting a dedicated category in your budget and save for the unexpected or annual costs associated with this aspect.

If you are someone who enjoys making a space your own, owning your home will allow for extensive renovations. Such projects can be inspiring and motivating, but keep in mind that they will require another dedicated space in your budget as well.

Although many people enjoy the renter lifestyle and its flexibility, others really take pride in being homeowners. If this is something that is important to you, consider it when balancing the rest of the factors, even though it is not very tangible.

Buying a home is an investment, since over time you build equity. However, you can consider different types of investing as well, such as the stock market. Depending on how you plan on using the money you set aside for investing, some options are better than others. Consider opportunity costs and what that would mean for your individual situation.

If you expect a job change or a significant expense in the near future, the decision to enter homeownership needs to be calculated. This is a big investment and financial stability is advised.

Similarly, if you think that your household might incorporate new members, then your buying decision should account for that in terms of the space and layout of the place you decide to purchase.

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