How to compare renting and buying
Use the same holding period for both options.
1
Enter the rent
Use the current market rent for a comparable home.
2
Enter the purchase costs
Include the price, down payment and mortgage rate.
3
Test the holding period
Change the years to find the break-even point for your situation.
What does this tool do?
Buying builds equity but brings transaction costs, maintenance and market risk, while renting is simpler but builds nothing; this model compares both over the same holding period.
The Formula
Buy net cost = Down payment + Payments + Upkeep + Selling costs − Equity; rent grows 3% a yearFrequently Asked Questions
What is the break-even point?
It is the holding period at which the net cost of buying falls below renting. Try several year values to find it.
What is excluded from the comparison?
Tax deductions, insurance, HOA dues and investment returns on the down payment. Include them for a personal answer.