Real Estate & Investing
Rent vs. Buy (Invest the Difference) Calculator
Compare the net worth of buying a home against renting and investing the down payment, closing costs, and any monthly savings.
Calculation inputs
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Estimates only. Actual outcomes depend on market performance, tax treatment, and personal spending behavior. Not financial advice.
About this calculator
This calculator compares the long-run net worth of buying a home against renting an equivalent home and investing the money you would have otherwise put into a down payment and monthly ownership costs. It is meant to help someone weigh housing decisions financially, not to say buying or renting is always the better personal choice.
How the calculation works
- Buy: monthly mortgage (P&I) + taxes + insurance + HOA + maintenance = total monthly housing cost; the home grows at the appreciation rate
- Buyer net worth at each year = home value − selling costs − remaining loan balance
- Rent: rent rises once a year by the rent increase rate
- The renter starts with the buyer's down payment plus closing costs invested, then adds each month's difference between buying and renting
- The renter's portfolio compounds monthly at the investment return rate
Notes and assumptions
Tax deductions, insurance changes, and major repairs are not modelled.
Results are highly sensitive to the appreciation rate and investment return you assume.
How it works in plain English
On the buying side, the calculator builds a full amortization schedule from the price, down payment, mortgage rate, and term, tracking the loan balance, home value growth from an appreciation rate, and total monthly housing costs including taxes, insurance, HOA dues, and maintenance. At any point, buyer net worth equals the home's value minus selling costs and the remaining loan balance.
On the renting side, rent starts at the entered amount and rises once a year by an annual rent increase rate. The renter is assumed to invest an amount equal to the buyer's down payment and closing costs on day one, then to add or subtract the monthly difference between what the buyer is paying and what the renter is paying, letting that portfolio grow at an assumed investment return rate.
The calculator compares both net worth paths at 5, 10, 15, 20, 25, and 30 years. The entire renter-side advantage depends on the assumption that the renter actually invests the monthly savings rather than spending them; if that saved money is spent on other things instead, the comparison no longer reflects reality.
Worked example
Consider a $400,000 home bought with 20% down ($80,000) at 6.5% over 30 years, versus renting an equivalent home starting at $2,200 a month with 3% annual rent increases, while both home value and investment returns grow at roughly 5% a year. The buyer's monthly housing cost, including principal, interest, taxes, insurance, and maintenance, runs higher than the starting rent, so the renter initially has more cash to invest each month on top of the $80,000 head start.
Over 30 years, the buyer builds equity through amortization and appreciation while the renter's invested difference compounds each month. Which path ends up ahead depends heavily on the appreciation rate versus the investment return rate entered, which is why the year-by-year table matters more than any single headline number.
Frequently asked questions
Which assumption changes the outcome the most?
The gap between the home appreciation rate and the investment return rate is usually the biggest driver, since both sides compound over decades. A one or two percentage point change in either assumption can flip which side comes out ahead by year 30, so it's worth testing a few realistic scenarios rather than trusting one run.
Does this include the mortgage interest tax deduction?
No, the calculator works in pre-tax terms and does not model mortgage interest or property tax deductions, which vary by household income, filing status, and whether someone itemizes. Including them would generally make buying look somewhat more favorable for filers who benefit from itemizing.
What if the renter doesn't actually invest the savings?
Then the comparison doesn't apply to that renter's real situation. The entire renter-side result assumes discipline: investing the down payment equivalent up front and the monthly cost difference every month. If that money is spent instead, the renter's real net worth will fall short of the projection.
Why does buyer net worth subtract selling costs?
Selling costs, typically real estate commissions and closing costs, are a real expense whenever the home is actually sold and converted to cash. Subtracting them gives a more honest comparison of what the buyer would walk away with, rather than an inflated paper value.
Is 30 years always the right horizon to look at?
No, the calculator shows checkpoints at 5, 10, 15, 20, 25, and 30 years because the better option can change depending on how long you stay. Renting often looks better over short horizons due to buying's upfront closing costs, while buying tends to catch up or pull ahead over longer periods.
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