Rent vs. Buy Calculator: Should You Rent or Buy a Home?
Use LendingTree’s calculator to help you decide between renting vs. buying
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Rent vs. Buy
We Recommend
BuyingBuying first becomes cheaper at the 6-year mark.
Total Expenses
Total Buying Expenses
$264,352
Total Renting Expenses
$329,515
Average Monthly Cost by Year
| Cost Item | Buying | Renting |
|---|---|---|
| Down Payment | $90,000 | — |
| Total Mortgage Paid | $288,282 | — |
| Principal | $50,858 | — |
| Interest | $237,424 | — |
| Property Taxes | $58,810 | — |
| Purchase Closing Costs | $9,000 | — |
| Home Insurance | $27,374 | — |
| HOA Dues | $6,570 | — |
| Home Maintenance Costs | $49,274 | — |
| Selling Expense | $36,286 | — |
| Estimated Tax Savings from Owning | -$5,623 | — |
| Sale Proceeds After Loan Payoff | -$295,620 | — |
| Total Rent Paid | — | $343,916 |
| Security Deposit | — | $2,500 |
| Security Deposit Refund | — | -$2,500 |
| Renters Insurance | — | $1,971 |
| Investment Income | — | -$16,372 |
| Total | $329,515 |
How to use our rent vs. buy calculator
If you’re debating between renting or buying a house, this calculator can help you compare homebuying and renting expenses over time. It also tells you which is the smarter choice, based on whether you’ll break even on the home purchase before you plan to move.
You’ll only need four pieces of information to get a result:
- Your current ZIP code (or your desired ZIP code)
- Your desired home price
- Your desired rent payment
- How many years you plan to live in the home
If you don’t know this specific information yet, use our suggestions to help you get started. While your expenses will vary based on your budget and location, we’ve provided estimated costs, based on industry averages and current economic conditions, to give you a clearer idea of what to expect.
Understanding your calculator results
The calculator will give you a recommendation to either buy or rent, depending on which move makes the most financial sense for the number of years you plan to stay in the home. It also estimates your break-even point, which is when the overall cost of buying becomes comparable to — or lower than — the cost of continuing to rent.
Use the line graph to compare the costs of buying versus renting over time and get a side-by-side look at the total costs of both options. If you’re interested in a more detailed look, click on the “Show breakdown” button to view the exact figures that went into calculating both price tags.
Calculator assumptions and methodology
Our calculator makes some assumptions about the upfront and recurring costs of both renting and buying a home to provide you with a recommendation. You can find these details in the calculator’s “advanced options” section. If you’d like, you can change any of them to further personalize your results.
There are a number of homebuying factors that can affect the rent versus buy calculator’s recommendations, and this section lets you fine-tune the numbers based on the following:
- Down payment. Your down payment amount will be a percentage of your desired home price. The calculator is preset with a 20% down payment because that’s the gold standard percentage that lenders traditionally prefer. These days, most mortgage programs don’t require you to put down that much, however. Some programs require as little as 3% or 3.5% down.
- Interest rate. Our calculator uses estimated rates, but check out current mortgage rates to get the most accurate recommendation.
- Mortgage term. You’ll have a choice between a 30- or 15-year loan term with this calculator. A 30-year term gives you the lowest monthly payment, but a 15-year term will help you save on interest charges if you can afford the higher payment that comes with a shorter term.
- Property taxes and home insurance. The calculator will estimate property taxes and homeowners insurance based on costs that are common for the ZIP code you entered. If you have exact numbers or percentages for a specific property, you can enter them here.
- HOA fees. If you’re buying a home in a subdivision controlled by a homeowners association, you’ll enter the monthly dues here.
- Annual maintenance. As a homeowner, you’re on the hook for maintenance and repairs. A good rule of thumb is to set aside 1% to 4% of the home’s value each year to cover home maintenance expenses.
- Annual home appreciation. The calculator assumes your house will appreciate at a rate of 3% per year. However, that figure may be much higher or lower depending on local housing market trends. Contact a real estate agent to figure out how quickly homes are appreciating in your area.
- Cost of selling your home. In this case, our calculator anticipates the traditional 6% real estate commission that agents would charge to help you sell your home. However, as a result of a recent legal settlement involving the National Association of Realtors (NAR), sellers can now negotiate these fees.
- Closing costs. As the buyer, you’ll also typically pay between 2% and 5% of the loan amount toward closing costs, including loan origination fees and home appraisal fees.
- Investment return rate. This can vary based on the real estate market in your area, but the calculator assumes you’ll get a 3% investment return rate. Contact an experienced real estate agent to learn more about anticipated returns in your market.
- Inflation. Our calculator assumes a 2% inflation rate. The consumer price index (CPI) tracks current inflation rates to help you access the latest data.
There are a number of tax benefits of homeownership. If you have your tax info handy, you can also add that information to the following rent versus buy calculator fields to get a more accurate picture of the potential costs:
- Annual income. You’ll want to specify how much you earn before taxes. Be sure to also include the income of any co-borrowers applying for a mortgage with you.
- Marginal income tax rate. Your tax professional can help you with this question if you don’t know the answer based on your recent tax returns. The Internal Revenue Service (IRS) also lists its tax brackets each year.
- Average savings and loan tax rate. This field allows the calculator to compare the benefit of keeping your down payment money in a savings account versus investing it in a home, and is preset to 5%.
- Other tax deductions. If you have any other tax deductions you typically take, such as student loan interest or charitable contributions, you can enter them here. The calculator will assume at least $2,500 of additional deductions.
- Married. The married checkbox will tell the calculator which standard deduction to choose based on your marital status. Check the box if you’re married and filing taxes jointly with your spouse.
- Rental inflation. If you’re not sure about this, ask a real estate agent who specializes in home rentals in your area. Otherwise, the calculator will assume your rent increases 3% every year.
- Security deposit. If you paid a security deposit when you moved in, list the amount here.
- Annual rental insurance. Any premium you pay for renters insurance should be entered here. The calculator suggests an annual $180 premium.
Is it cheaper to rent or buy?
If you live in a large metro area, renting is almost certainly cheaper on a monthly basis, according to a LendingTree study of housing costs in the 100 largest U.S. metro areas.
The study showed that the dollar difference between renting and owning a home with a mortgage is widest in San Francisco, Bridgeport, Conn., and New York. The difference is most narrow in Phoenix, Orlando, Fla., and Columbia, S.C.
However, knowing which is cheaper per month — renting or buying — still doesn’t give you the whole picture. The calculator gives you a full breakdown of the itemized costs of renting versus owning, customized for someone with your housing budget and planned length of stay in the area.
Read more about whether it’s better to rent or buy.
Beyond the numbers: Factors to consider
Complexity and unpredictability
Owning a home means taking on far more than a monthly payment. Aside from the upfront costs of purchasing, there will also be ongoing maintenance, insurance and property tax costs. Unlike with a rent payment, there’s no upper limit that will protect you — if you suddenly need a new roof or well, you have to shoulder that burden.
If you aren’t worried about affording those things, you may be ready to buy. On the other hand, if you enjoy the simplicity and predictability of making set monthly payments — and knowing that your housing costs aren’t going to randomly go up — it might be smarter to continue renting.
Personalization
When you own your own home, you’re able to paint to your tastes, knock down walls or even build additions if you want to. If you like the idea of making customizations and renovations, think about buying. If having that option isn’t very important to you, renting may be your best bet.
Location
Think about where you want to live and what specific details around that location are important to you. Do you want a walkable area with access to public transportation? Does the quality of the school district matter? Can you afford to buy there, or is renting more accessible, as is the case in many high-cost metros?
Frequently asked questions
The 5% rule tells us that, if the rent you pay in a year is more than 5% of the home’s value, it would make more financial sense to purchase the home than rent it.
The 5% figure comes from the fact that the costs of homeownership — such as mortgage interest, property taxes and maintenance — can total roughly 5% of a home’s value each year.
And while few people are deciding whether to rent or buy the exact same home, the rule can still help anyone evaluate whether renting or buying is likely to be more cost-effective in the current market.
No, renting is not a waste of money. Whether you’re buying or renting, you’re paying money for shelter. Many people focus on the fact that owning a home can be a good investment, but there’s no guarantee that if you own a home, its value will increase. And even if it does, you’ll have to consider all of the additional money you’ve put into buying and maintaining the home that you wouldn’t have put into a rental.
Ultimately, viewing a home as an investment vehicle may not be the most useful framing. It makes sense to purchase a home if it will give you the lifestyle you want and you can afford it. But if renting is more in line with your lifestyle and budget, it can make sense to do that instead.
Renters insurance is usually much cheaper. LendingTree’s rent versus buy calculator assumes an annual renters insurance cost of $180 and an annual homeowners insurance cost of $1,000.