Is buying better than renting and investing? Compare net worth year by year and find the year buying pulls ahead.
Showing the first 5 years and the final year of the horizon.
This is a simplified model. Buying builds net worth through home price growth plus principal paydown. Renting builds net worth by investing the down payment and investing the monthly difference between buying costs and rent each month. The model ignores transaction fees, closing costs, tax benefits, rent deposits, moving costs, and the value of your time. Taxes, insurance, HOA dues, and maintenance are held flat, while rent grows at the rate you enter and the home value grows at the appreciation rate you enter. Treat the break-even year as a planning guide, not a prediction.
Results are estimates for education only and are not financial advice.
Monthly buying cost = mortgage payment + taxes ÷ 12 + insurance ÷ 12 + HOA + maintenance rate × price ÷ 12. Buy net worth in year t = price × (1 + appreciation)^t − remaining loan balance. Rent net worth starts at the down payment, grows at the investment return, and gains or loses the monthly difference between buying cost and rent. The break-even year is the first year buy net worth is at least rent net worth.
A $500,000 home with $100,000 down at 7.0% over 30 years costs $3,927.88 per month to own. Against $2,800 of rent growing 3% a year, and a 7% investment return, buying pulls ahead in year 13. After 20 years, buy net worth is $673,855.30 and rent net worth is $618,126.58, a difference of $55,728.72 in favor of buying.
When rent is far below the monthly cost of owning, the renter invests a large monthly surplus plus the whole down payment, and that portfolio can stay ahead for the full horizon. A lower investment return, faster rent growth, or faster home growth moves the break-even year earlier.
It lowers the mortgage payment, but it also gives the renter a bigger starting portfolio in this model. The net effect depends on the rates you enter, so try both and compare the break-even year.
Closing costs on buying and selling, agent commissions, tax deductions, rent deposits, maintenance surprises, and the risk that prices or rents move differently than assumed. A real decision should also weigh job stability, how long you will stay, and how much you value owning.
Use this calculator when the question is not which payment is lower this month, but which path leaves you wealthier after many years. Buying builds net worth through home price growth plus principal paydown. Renting builds net worth by investing the down payment and investing the monthly difference between buying costs and rent each month. The calculator compares the two year by year, and the first year buying pulls ahead is the break-even year. Treat that year as a planning guide, not a prediction: it moves a lot when you change the appreciation rate, the rent growth rate, or the investment return.
Start with the monthly snapshot, because it shows why the comparison is closer than it looks. Take a $400,000 home with 20 percent down ($80,000). The loan is $320,000 at 6.5 percent over 30 years, giving principal and interest of $2,022.62 per month. Add property tax at 1.2 percent of the price per year ($400.00 per month), insurance of $1,800 per year ($150.00 per month), and maintenance at 1 percent of the price per year ($333.33 per month). The total monthly cost of owning is $2,905.95. Against rent of $2,200, the gap is $705.95 per month. In the page model, the renter invests that gap plus the $80,000 down payment. That invested gap is why renting can stay ahead for years even when the monthly rent looks cheaper than owning: the renter is not spending the difference, they are investing it.
Now add what the model leaves out, because the omissions cut both ways. The opportunity cost of the down payment is already in the model: $80,000 invested at 7 percent for 10 years grows by $77,372.11, and the renter side of the comparison counts exactly that kind of growth. What the model does NOT include is transaction costs. Buying closing costs often run roughly 2 to 5 percent of the price, and selling costs, including agent commission, often run several percent more. Those costs land hardest on short stays: buy and sell within a few years and the round trip costs can erase years of appreciation. The model also leaves out maintenance surprises beyond its flat rate, rent deposits, moving costs, and the value of stability and control that owning provides, such as renovating without asking a landlord. A break-even year that ignores transaction costs is optimistic for buying, so add those costs mentally before deciding.
Three mistakes show up often. First, people compare the mortgage payment with rent and forget tax, insurance, HOA dues, and maintenance. The full owning cost is the only fair comparison, and it is always higher than principal and interest alone. Second, people assume steady appreciation. The model grows the home value every year at the rate entered, but real prices stall and fall for years at a time, and flat years push the break-even year much later. Third, people ignore how long they will stay. Job moves, family changes, and life surprises shorten many stays, and a short stay rarely favors buying once transaction costs are counted. If your stay is uncertain, weight the flexibility of renting more heavily than any single break-even year suggests.
No universal rule exists, because the answer depends on local prices, rents, rates, and your own costs. A common planning shortcut is that longer stays favor buying, since transaction costs spread over more years and principal paydown accumulates. Use the calculator's break-even year for your numbers, then add transaction costs and your own moving risk before treating it as a decision.
Faster rent growth moves the break-even year earlier, because the renter's monthly surplus shrinks as rent climbs toward the owning cost. Test a higher rent growth rate in the calculator and watch how many years the break-even moves. The reverse is also true: if rent stays flat while owning costs rise with tax and insurance, buying looks worse.
No. The page states that its model ignores tax benefits, along with transaction fees, closing costs, and moving costs. Mortgage interest and property tax deductions can favor buying for people who itemize, but they depend on individual tax situations and current law. Add any expected tax benefit separately rather than assuming the calculator includes it.
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