Rent Vs. Buy Calculator

It’s easy to think the higher upfront costs of a down payment and closing costs would make buying a home more expensive than renting one. But renting a home year after year can be more costly once you consider the equity you could gain from owning a home. Use our rent versus buy calculator to learn more about how these options might work for your finances, goals and time frame.

Payment information is not a determination of eligibility. This calculator is provided for estimation purposes only, and is based on your self-reported information and aggregate national averages.

How To Calculate The Costs Of Renting Vs. Buying

To use the calculator and compare the costs of renting versus buying a home, provide the following information:

Purchase price: The amount you expect to pay for a home.
Down payment: The amount of the purchase price you plan to pay upfront.
Monthly rent: The amount you pay each month in rent for a home.
State: Choose the state you plan to live in.
Property taxes: Your estimated annual tax bill.
Interest rate: A percentage rate that determines how much you pay your lender to borrow the money to buy a home.
Closing costs: The fees you pay to fund your loan and transfer legal ownership of the property – typically 2% to 5% of the purchase price.
Private mortgage insurance: If you put down less than 20% on a conventional loan, you’ll have to pay PMI. Enter your estimated annual PMI cost.
Homeowners insurance: Your estimated annual premium.
Homeowners association fees: Annual dues you pay to your HOA.
Home maintenance: The estimated annual cost of maintaining your home – typically 1% to 4% of your home’s value.

The calculator will use the information you enter to create a graphical breakdown comparing your cost to buy versus rent a home over time.

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Renting Vs. Buying: Real Estate Market Considerations

Interest rates and real estate market conditions can have a strong influence on whether it’s best to rent or buy a home.

Lower interest rates make buying a home more affordable, while higher rates make it more expensive. Buying may make more sense when interest rates are low, but buyers have no control over current or future interest rates.

Similarly, if there are plenty of homes available and few buyers looking, you can expect home prices to be more affordable and sellers more willing to bargain. But if it’s a seller’s market, high demand for the available inventory will push up prices and make buying more expensive.

While rents may decline in a buyer’s market and increase in a seller’s market, they may not rise or fall as quickly as home prices.

Renting Vs. Buying: Nonfinancial Considerations

While finances are important, you also want to consider nonfinancial factors. If you’re looking for a short-term living situation because you plan to relocate soon, renting will be more flexible. If you’re planning additions to your family, it may make more sense to buy a home in a good school district or a house that has space to grow into. You should make a choice that best fits your budget, lifestyle and goals.

Pros Of Buying Vs. Renting

Benefits to buying a home instead of renting include:

Long-term price stability. When you rent, you expect your rent to increase over time based on demand and inflation. If you buy a home with a fixed-rate mortgage, your principal and interest payment stays the same for the life of the loan. You’ll know how much you pay toward your loan each month without worrying about an increase.
Ability to build equity. As you reduce the amount you owe on your home compared to its value, you build equity. Your equity can be converted into cash by borrowing it with a cash-out refinance, home equity loan, or home equity line of credit, or by selling it.
More control over your home. You’re free to customize and renovate your home any way you like without needing permission from a landlord.

Cons Of Buying Vs. Renting

Drawbacks to buying a home instead of renting include:

Moving is more difficult. If you want or need to move, selling a home takes time and effort. If you rent, moving on to your next home is relatively easy.
Longer commitment. It takes time to pay down your principal on your mortgage, which means it takes a while to build equity. Getting value from owning a home requires you to commit to owning it for at least a few years.
Higher upfront costs. You need to make a down payment and pay closing costs when you buy a home, and it’s much more expensive than the security deposit required to rent. Most people need time to save enough money to buy, and they may not see a return on that investment for several years.

Calculator Methodology

Learn how our rent vs. buy calculator comes up with your results.

How Our Calculator Estimates The Cost Of Buying

To estimate the true cost of homeownership, the calculator applies typical one-time costs and ongoing expenses of owning a home, and then subtracts the equity you gain over time from making payments toward your mortgage principal and witnessing home values appreciate naturally.

It makes certain assumptions about your mortgage and the home you’re buying:

You are getting a 30-year fixed-rate mortgage.
Your home’s value will appreciate from year to year, which increases the amount of equity you have.
To start, closing costs default to 4% of the purchase price, homeowners insurance premiums are set to $100 per month, and annual home maintenance costs are estimated at 1% of the purchase price. These fields can all be adjusted.
The default PMI rate is based on the size of your down payment and a credit score of 660 to 719. You also can add your own estimate.

How Our Calculator Estimates The Cost Of Renting

We apply typical one-time costs and ongoing expenses that come with renting. However, the only standard one-time cost is a security deposit, which typically equals one month’s rent. Ongoing expenses for renting include your monthly rent payment and renters insurance premium. We’ve factored in an estimate for the average premium.

We also assume when estimating the cost of renting that your rent will increase from year to year, which makes our calculations more realistic.

Don’t Make Our Calculator Your Last Stop

Remember that the calculator results are estimates to help you decide whether renting or buying a home is right for you. You can learn more about all aspects of the home buying process by visiting the Quicken Loans Learning Center.