Rent vs Buy Calculator

The rent vs buy formula

The fair comparison is the total monthly cost of owning against the rent. Owning has four parts: the mortgage principal-and-interest payment, monthly property tax, monthly insurance and any HOA dues. The mortgage payment uses the standard amortization formula:

M = P × i × (1+i)ⁿ ÷ ( (1+i)ⁿ − 1 ) own cost = M + tax_mo + insurance_mo + HOA

Here P is the loan (price − down payment), i is the monthly rate (annual ÷ 12) and n is the number of payments (years × 12). Monthly property tax is price × tax% ÷ 12, and monthly insurance is the annual premium ÷ 12. Subtract the rent from the own cost to get the monthly difference.

Worked example

$1,800 rent vs a $350,000 home, $70,000 down, 6.5% over 30 years, 1.1% property tax, $1,500 insurance, no HOA:

Loan amount: $350,000 − $70,000 = $280,000.

Mortgage P&I: i = 6.5% ÷ 12, n = 360 → $1,769.79 a month.

Property tax: $350,000 × 1.1% ÷ 12 = $320.83.

Insurance: $1,500 ÷ 12 = $125.00.

Total to own: $1,769.79 + $320.83 + $125.00 + $0 = $2,215.62 — about $415.62 more than the $1,800 rent.

What this comparison leaves out

A monthly-cost snapshot is a useful starting point, but the full rent-versus-buy decision depends on factors this tool deliberately keeps out. The table below lists what's included and what isn't.

Included	Not included
Mortgage principal & interest	Maintenance & repairs
Property tax	Home-price appreciation
Homeowners insurance	Closing & selling costs
HOA dues	Opportunity cost of the down payment

Honest caveat: this is a simplified monthly comparison. It excludes maintenance, home-price appreciation, closing costs and the opportunity cost of your down payment — all of which can change the long-run answer. Part of every mortgage payment is also principal you keep as equity, so a higher monthly cost to own isn't pure expense.

Frequently asked questions

How do you compare renting and buying month to month?

Add up the monthly cost of owning — mortgage principal and interest, property tax, homeowners insurance and any HOA — and compare it directly with the rent. This tool does that and shows the difference and which option is cheaper each month.

What costs does this rent vs buy calculator leave out?

It is a simplified monthly comparison. It excludes home maintenance and repairs, home-price appreciation, closing costs, and the opportunity cost of tying up your down payment. Those can swing the long-run answer significantly.

Is a lower monthly cost always the better choice?

Not necessarily. Owning builds equity and can appreciate, while part of every mortgage payment is principal you keep. Renting stays flexible with no maintenance risk. The monthly difference is one input into a bigger decision.

How is the monthly mortgage payment in this tool calculated?

It uses the standard amortizing formula M = P × i × (1+i)ⁿ ÷ ((1+i)ⁿ − 1), where P is the loan (price minus down payment), i is the monthly rate and n is the number of monthly payments. Only principal and interest are in M; tax and insurance are added separately.

The rent vs buy formula

Worked example

What this comparison leaves out

Frequently asked questions

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