Which option is right for you?
Rent or Buy Calculator
Everyone wrestles with the age-old question of should I buy or should I rent? The calculator below helps you determine which option makes the most financial sense for you.
Operating Cost Assumptions
Annual Price Growth(%)
Cost of Capital(%)
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Description of results
If you can pay less than, it makes more sense to rent rather than buy.
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Using the Rent vs. Buy Calculator
How it works
The Rent or Buy calculator can help you compare the financial cost of renting to the financial cost of owning a home.
Below is an explanation of how the calculator works and how you can use the calculator to help decide whether you should buy or rent.
Make sure you check out our Buy vs. Rent post for even more details.
What does "Breakeven Rent" mean?
Breakeven rent is the amount of rent you would pay that would be financially equivalent to buying a home with the details you entered.
For example, you might use the calculator and find that the breakeven rent for a $500,000 home with a 30-year mortgage at 6% was $1,700/mo. This means that if you can find an apartment you like for less than $1,700/mo., renting will be a better financial decision than buying.
How is "Breakeven Rent" calculated?
When comparing the difference in financial costs between buying and renting, there are a number of expenses to factor in. For renting, it’s much more straightforward, just look at the rent payment.
For buying though, there are many other expenses besides just the mortgage. In no particular order, these expenses are: closing costs, transfer taxes, maintenance and repair, property taxes, title insurance and realtor fees.
However, there are also financial benefits from buying that you don’t get from renting. These include: property price appreciation, principal paydown and tax benefits. To accurately compare the cost of buying vs. renting, you need to factor in the costs and benefits of buying.
Explanation of assumptions.
Understanding the calculator assumptions
Purchase price: The price paid for the home.
Transfer tax: Transfer tax a one-time tax or fee imposed by a state or local jurisdiction upon the transfer of a property. Transfer tax varies by location. In some cases it is paid by the seller and in some states there is no transfer tax. Transfer tax amounts vary dramatically state by state from zero in some to as much as 2.9% of the purchase price in states like New York. Additionally, in some states the transfer tax is paid by the seller of the property.
Title insurance: Title insurance is an insurance policy that financially protects home buyers and lenders in the case of a property title defect. The most common type of title insurance is lender’s insurance, which is purchased by the borrower to protect the provider. The cost of lender’s title insurance varies by state, but usually ranges from 0.5% to 1% of the home purchase price. Owner’s title insurance is a separate policy and costs a few hundred dollars.
Other mortgage fees: This umbrella term includes fees such as the appraisal fee, home inspection fee, loan origination fee, application fee, credit report free, recording fee (for new deed), and any document preparation fee. These fees vary widely from lender to lender. For the calculator, enter the sum of all fees associated with the mortgage in this category.
Down payment: The percent of the home value you pay upfront. Typically this is 20% for most standard mortgages by can vary depending on lending terms.
Mortgage rate: This is the annual interest rate you pay for the mortgage.
Holding Period: This is the length of time you plan on staying in the home.
Amortization term: This is the term of the mortgage, most commonly this is 30 years but it can also be 15, 10, 7 or 5.
Property tax: Varies by location. Is typically assessed as a dollar amount per million dollars of property value, sometimes called a mil rate. This can vary
Tax rate: this is your all-in personal income tax rate, including federal, state and local income taxes. The tax rate can vary from as low as 0.28% to as high as 2.5%. This tax is paid annually.
Maintenance costs: For the calculator, maintenance costs are set as a percent of the value of the home. Typically this can range from 0.5% for newer homes to 3% or more for older homes.
Annual price growth: This assumption sets the annual growth in home price that you expect. Historical averages nationally are between 4 and 7% per year although this varies widely by location. A conservative assumption would be between 1 and 2% per year.
Cost of capital: This is the expected return you can get with your money if you did NOT use it to buy a home. For example, if you typically keep all of your money in a savings account that pays 2% per year, your cost of capital would be 2%. If you invest your money in the S&P500, your cost of capital would be the historical average return of the S&P500 which is in the 5-8% per year range. A conservative assumption would be in the 3-5% range for cost of capital.
Realtor fee: The realtor fee is paid by the seller upon sale of the property. This is a cost to you of selling your home. Realtor fees range from 3-6%