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Housing · Break-even net worth

Rent vs buy calculator

The honest version: compares net worth in both scenarios, properly accounting for opportunity cost of the down payment, maintenance, and the 6% commission on selling. Shows the exact break-even year.

By Snowballr Research Team
Last reviewed May 21, 2026Fact-checked against primary sourcesEditorial standards
Built from: IRS · FINRA · SEC · BLS · Federal Reserve · Freddie Mac · Methodology & sources →
The hidden cost most calculators ignore

The down payment is not "free money you're spending on the house." It's $60-80K you could have invested at 7%, becoming $118-158K in 10 years. The buy-vs-rent calculation only works if you include this opportunity cost — most online calculators don't, which is why they tell you to buy at year 2.

The price-to-rent ratio

The fastest proxy for "rent or buy" is the price-to-rent ratio: home price ÷ annual rent.

  • P/R below 15: buying is usually clearly better. Common in Midwest cities, smaller metros.
  • P/R 15-21: ambiguous zone — depends heavily on how long you stay, mortgage rate, and investment return assumption.
  • P/R above 21: renting is usually better. Typical of SF, NYC, Seattle, Boston, LA where rent is materially cheaper than equivalent ownership.

Example: $400K house renting for $2,200/mo = $26,400/yr = P/R 15. Borderline. $700K house renting for $2,800/mo = $33,600/yr = P/R 21. Lean rent.

What this calculator gets right

  • Down payment + closing costs invested at your assumed return if you rent
  • The monthly buy-cost premium also invested if you rent (only when buy is more expensive)
  • Maintenance at 1% of home value/year (escalates with appreciation)
  • 6% commission on selling at the end of your horizon
  • Property tax escalates with home value
  • Rent grows annually at your specified rate

What this calculator does NOT model

  • Mortgage interest deduction: only ~5-10% of filers itemize since TCJA. Worth $0-1K/yr for most.
  • HOA fees: add into maintenance for condos/townhomes ($300-800/mo typical).
  • Renter's insurance: $15-30/mo — small but adds up over decades.
  • Major repairs: roof ($10-15K), HVAC ($8-12K), foundation ($5-30K). Lumpy and unpredictable.
  • Lifestyle value: some people pay a premium for the security of ownership; some for the flexibility of renting. Not a number.

Why the math often disappoints prospective buyers

The instinctive narrative — "I'm building equity instead of throwing money away on rent" — confuses cash flow with wealth. A mortgage payment is mostly interest in the first decade (the principal portion is roughly the equity you "build"). At 6.5% on a $320K loan, year one: $24K paid, ~$20K is interest, $4K is equity. Add property tax + insurance + maintenance and you're "throwing away" $30-35K/year regardless of equity buildup. The fair comparison is total net worth at the end, not "equity built."

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