Finance
Compare buying a home to renting and investing the difference, and see which builds more net worth over time.
| Year | Home equity (buying) | Rent paid this year | Renter portfolio |
|---|
This calculator assumes both scenarios start on equal footing: the buyer puts their down payment into the home, while the renter invests that same amount instead. Each month, whichever scenario costs less lets that person invest the difference — so if owning costs more per month than renting, the renter is assumed to invest that gap at your chosen return rate, and vice versa.
At the end of the comparison period, "net worth if you buy" is the home's value (after estimated selling costs) minus the remaining mortgage balance. "Net worth if you rent" is the total value of the invested down payment plus every invested monthly difference, grown at your assumed investment return. Whichever number is larger represents the better financial outcome under these assumptions — though non-financial factors (stability, flexibility, lifestyle) matter too and aren't captured here.
Common questions about the buy-vs-rent decision and this calculator's assumptions.
Not necessarily — it depends heavily on how long you stay, local home price growth versus rent growth, and what you'd do with the money otherwise. Buying tends to look better the longer you stay in one place (since large upfront costs like closing fees and selling costs get spread over more years), while renting can come out ahead in expensive markets with strong investment returns available elsewhere, or when you might move within a few years.
It's the standard framework financial researchers use to make an apples-to-apples comparison. Without it, you'd just be comparing 'money spent on housing' between two very different products — one of which (a home) is also an appreciating asset. Assuming the renter invests whatever they aren't spending on housing (relative to the buyer) isolates the actual financial trade-off rather than just comparing monthly bills.
Try adjusting the appreciation rate to match your local market's recent history, or run the calculator at a lower and higher rate to see a range. National average home appreciation has historically run close to inflation over very long periods, but specific metro areas can run well above or below that for years at a time, so a single national average isn't necessarily representative of your area.
Not explicitly as a separate line — you can approximate them by increasing your down payment input slightly to reflect the extra cash you'd need at closing (typically 2-5% of the home price for buyer closing costs in most of the U.S.). Selling costs (typically 6-8% for agent commissions and fees) are included as the 'selling costs when sold' input, since those apply when calculating the buyer's net equity.
It doesn't capture non-financial factors like stability, the ability to customize your home, moving flexibility, or the effort of maintenance and repairs that a landlord would otherwise handle. It also assumes a single lump-sum comparison at the end of your chosen period rather than accounting for the possibility of moving partway through, which would change the selling-cost timing for a buyer.
