Rent vs. Buy

Comparing Net Worth Under Renting vs. Buying

Renting and buying are compared as a net-worth outcome, not just a monthly cost — since buying builds equity in a home while renting frees up cash to invest instead. Enter the home price, your down payment, mortgage rate, comparable rent, and how long you plan to stay, and this calculator projects your net worth under each option at the end of that period.

The buying side accounts for your mortgage payment, ongoing home costs (property tax, insurance, and maintenance, combined into one adjustable percentage since exact local rates vary too much to assume), and the home’s appreciation, minus what you’d still owe and what it costs to sell. The renting side assumes you invest whatever cash buying would have required upfront (the down payment and closing costs), plus whatever amount owning costs more than renting in any given year — a standard way of framing renting’s “opportunity cost” advantage.

The Formula

Buying’s net worth at the end of the comparison period:

$$\vE{\text{Buy Net Worth}} = \vA{\text{Home Value}} \times (1 - \vB{\text{Selling Cost}\%}) - \vC{\text{Remaining Mortgage Balance}}$$

Renting’s net worth is an investment portfolio that starts at $\vD{\text{Down Payment}} + \text{closing costs}$ and grows every year at your assumed investment return, plus whatever amount owning would have cost more than renting that year (if any):

$$\vF{\text{Rent Net Worth}} = \text{accumulated portfolio value at the end of the comparison period}$$

$\text{Net Result} = \vE{\text{Buy Net Worth}} - \vF{\text{Rent Net Worth}}$ (positive favors buying, negative favors renting)

This calculator also finds the break-even year — the point where buying’s net worth first catches up to renting’s, since buying’s larger upfront costs usually mean renting looks better in year one, but that can flip as equity builds and rent keeps rising.

Worked Example

A $400,000 home with 20% down, a 6.5% 30-year mortgage, 2%/year combined home costs, 3% annual appreciation, 3% closing costs, and 6% selling costs — compared against $1,800/month rent rising 3% a year, with a 6% investment return, over 7 years:

1. Down payment: $80,000. Closing costs: $12,000. Both assumed invested if renting instead.
2. Over 7 years, the home appreciates and the mortgage balance shrinks, building equity.
3. See your own result above for which option comes out ahead at this specific horizon — and the break-even year where the answer would flip.

Key Factors to Consider

• The length of time you plan to stay is one of the single biggest drivers of which option wins. Buying’s large upfront costs (down payment, closing costs) get spread over more years the longer you stay, while a short expected stay concentrates those costs into fewer years of benefit — this is exactly why the break-even year this calculator finds matters as much as the final net-worth comparison itself.
• Renting offers flexibility that buying doesn’t, which this calculator’s dollar-based comparison doesn’t directly capture. The ability to move easily for a job opportunity, without the time and cost of selling a home, has real value beyond pure net worth — worth weighing alongside the financial comparison, especially for someone whose plans are uncertain.
• Non-financial factors of homeownership (stability, control over the space, no landlord) matter to many people beyond the pure investment comparison. This calculator focuses specifically on the financial/net-worth question — the personal, non-financial value some people place on homeownership (or conversely on renting’s lower responsibility) is a separate, legitimate consideration this comparison doesn’t quantify.
• Every input here is a plain, editable assumption, not a guaranteed forecast. Appreciation rate, investment return, and rent growth are all genuinely uncertain over a multi-year horizon — running this calculator with a few different assumption sets (a conservative case and an optimistic case) gives a more honest picture than trusting one single result.

Common Mistakes

• Ignoring the opportunity cost of the down payment. Money tied up in a down payment and closing costs could otherwise have been invested — this calculator’s “renting” scenario specifically credits that amount as an investment, which is what makes the comparison fair rather than automatically favoring buying.
• Assuming today’s appreciation rate holds steady for years. Home values don’t rise in a straight line — the appreciation assumption above is a planning estimate, not a forecast, and the real answer can shift meaningfully with a different rate.
• Forgetting selling costs when comparing net worth. Realtor commissions and closing costs on a future sale (commonly 6-10% of the sale price) reduce what buying actually nets you — this calculator already subtracts them, but it’s easy to forget when comparing the two paths by hand.

Useful to Know

• Want to check whether a specific mortgage payment fits your budget before running this comparison? Mortgage Affordability Calculator estimates how much home you can comfortably afford.
• Curious about the exact monthly payment and full amortization schedule for a specific loan amount? Mortgage Calculator breaks down principal, interest, taxes, and insurance.
• Renting with roommates and want to see how the rent itself divides up? Rent Split Calculator splits a rent amount fairly among multiple people.