Renting isn’t “throwing money away”
The popular wisdom that rent is wasted money ignores the other side of the ledger. Buying ties up a large lump sum in a down payment and closing costs, and saddles you with property tax, insurance, maintenance, and the 5–6% it costs to sell. A renter who invests the money a buyer would have sunk into the house can build serious wealth of their own. The honest question isn’t “rent or mortgage?” — it’s “which choice leaves me with more net worth over the time I’ll actually stay?”
How we compare
We track two net worths year by year. Buying = home value − selling costs − remaining mortgage + invested cash.Renting = an investment portfolio seeded with the buyer’s down payment and closing costs. Whichever option is cheaper in a given year invests the difference, and both portfolios compound at your investment return. The break-even year is where the two lines cross.
What makes this calculator different
- Opportunity cost, front and centre. The down payment and closing costs are invested on the renting side — the factor most calculators quietly ignore.
- The full cost of owning. Property tax, insurance, maintenance, HOA, and the cost to buy and sell — not just principal and interest.
- A clear break-even year. See exactly when buying overtakes renting, so you can match it against how long you’ll stay.
- Net worth over time. A two-line chart shows both paths and the crossover at a glance.
Frequently asked questions
Why isn’t this just “rent vs. mortgage payment”?+
Comparing your monthly rent to a mortgage payment misses almost everything that matters. Owning carries property tax, insurance, maintenance, and HOA dues on top of principal and interest — and you pay closing costs to buy and to sell. Meanwhile the cash you’d sink into a down payment could be invested instead. This calculator models all of that and compares the net worth you’d end up with under each choice, which is the only fair comparison.
What is the opportunity cost of the down payment?+
The down payment and buying closing costs are real money — typically tens of thousands of dollars — that a buyer ties up in a house. A renter who doesn’t buy can invest that lump sum instead. We seed the renter’s investment portfolio with that exact amount and grow it at your chosen investment return, so the comparison credits renting with the returns the buyer gave up. This opportunity cost is often the single biggest factor in the result.
What is the break-even year?+
Buying usually starts behind because of the large up-front costs, then catches up as you build equity, the home appreciates, and rent keeps rising. The break-even year is the first year in which the buyer’s net worth equals or exceeds the renter’s. If you expect to move before then, renting tends to win; if you’ll stay well past it, buying tends to win. If buying never catches up within your horizon, we report “Never.”
How are the two net worth figures calculated?+
For buying, net worth each year is the home’s value minus selling costs, minus the remaining mortgage balance, plus any cash invested. For renting, it’s simply the value of the investment portfolio — seeded with the buyer’s up-front cash and topped up each year with the difference whenever renting is the cheaper option. Both portfolios grow at the same investment return so the comparison is apples-to-apples.
Does this account for taxes?+
No — and that’s a deliberate simplification. The model works in nominal dollars and ignores income-tax effects on both sides: the mortgage-interest and property-tax deductions that can benefit buyers, and the capital-gains tax that can reduce investment returns for renters. It also assumes the home is sold at the end of your horizon to realise selling costs. Treat the output as a clear directional comparison, not tax advice.
Disclaimer: This calculator is for educational purposes only. It works in nominal dollars and ignores income-tax effects (such as the mortgage-interest deduction and investment taxes), and real outcomes depend on market returns, local costs, and how long you stay. It is not financial advice.