"Should I rent or buy?" is one of the most consequential financial decisions most people ever make, and also one of the most commonly miscalculated. The instinctive comparison — rent payment vs mortgage payment — misses most of what actually matters: the opportunity cost of the down payment, ongoing costs unique to ownership, the cost of eventually selling, and what a renter could do with the money they're not tying up in a house. A proper comparison tracks net worth under each scenario over time, not just monthly cash outflow.

This is the most common argument for buying, and it's only half true. A portion of every mortgage payment does build equity — but a large portion, especially in the early years, is interest, which is just as "wasted" as rent in the sense that it never comes back to you. On top of that, owning carries costs a renter never pays directly: property tax, maintenance, homeowners insurance, and the eventual cost of selling (commonly 6-8% of sale price in agent commissions and closing costs). None of these build equity either.

A 20% down payment on a $400,000 home is $80,000 that a renter never has to set aside — they can invest it instead. This calculator assumes the renter invests an amount equal to the buyer's down payment and closing costs at the start, then continues investing the monthly difference whenever renting costs less than the buyer's mortgage-plus-ownership-costs that month. Over a 15-20 year horizon, this invested capital compounding in the market is often a bigger factor in the comparison than people expect.

A $400,000 home, 20% down, 6.5% mortgage rate over 30 years, against $2,200/month rent, with 4% home appreciation, 3% rent growth, and a 7% investment return for the renter's portfolio:

In this example, renting is narrowly ahead at year 5, but buying overtakes it by year 10 and pulls further ahead by year 15 — the breakeven point lands somewhere in between, once home appreciation and forced equity paydown have had enough time to compound. Change the appreciation or rent growth assumptions even slightly, and this breakeven point can shift by years in either direction, which is exactly why this is a calculation worth running with your own numbers rather than trusting a generic rule of thumb.

A commonly cited heuristic from financial writer Ben Felix and others: multiply the home price by roughly 5% (covering a blend of property tax, maintenance, and the opportunity cost of capital tied up in the home) and divide by 12 to get a rough "breakeven monthly rent." If you can rent a comparable home for less than that figure, renting is likely the better deal on pure financial terms; if comparable rent is higher, buying likely wins. This shortcut ignores appreciation entirely, so it works best as a quick sanity check, not a substitute for the full year-by-year comparison.

Buying almost always loses in the first few years, because closing costs and the early-mortgage interest-heavy payments front-load the cost of ownership before appreciation and equity paydown have time to compound. The real question isn't "who wins today" but "how many years do I need to stay for buying to catch up and overtake renting" — if you're confident you'll stay well past that breakeven point, buying's long-run advantage typically holds; if you might move sooner, renting's flexibility carries real financial value too.

Owning provides stability, the freedom to renovate, and protection from a landlord raising rent or declining to renew a lease — renting provides flexibility to relocate, no responsibility for repairs, and no exposure to a declining local housing market. These factors are genuinely important to most people's decisions and have no dollar value to plug into a spreadsheet, but they're worth weighing alongside whatever this calculator's numbers say.