Rent vs Buy: How to Compare the Real Costs (Free)

To decide rent vs buy, compare the money you'll never get back. For a renter, that's the rent. For an owner, it isn't the whole mortgage payment: it's the interest, property tax, insurance, maintenance, buying and selling costs, and the returns your down payment could have earned elsewhere. The repaid principal is yours, so it doesn't count as a cost. The free mortgage calculator gives you the interest figures, and this guide shows how to add up the rest by hand.

This is a framework, not financial advice. The answer depends heavily on your assumptions, so try more than one set.

Why "rent is throwing money away" is only half true

Rent is money you don't get back. But a large part of an owner's spending isn't recovered either. In the first year of a $320,000 mortgage at 6.5%, about $20,700 of the roughly $24,300 in payments is interest. Only about $3,600 becomes equity. Add tax, insurance and repairs, and the owner's unrecoverable costs can easily match or beat a renter's.

The fair comparison is unrecoverable costs vs unrecoverable costs.

The owner's unrecoverable costs

Cost	Where to get the number
Mortgage interest	The Total interest and yearly Interest in the mortgage calculator's schedule
Property tax	Your local tax rate or the listing; enter it monthly in the calculator
Home insurance	An insurance quote
HOA or maintenance fees	The listing or building
Repairs and maintenance	Often budgeted at around 1% of the home's price a year as a rough guide; older homes can need more
Buying and selling costs	Closing costs, agent fees and transfer taxes; ask a local agent, as these vary a lot by place
Lost returns on the down payment	What the down payment and closing costs could have earned invested; see the free compound interest calculator

On the other side, an owner may gain if the home rises in value, and in some countries may get tax benefits on mortgage interest. Both depend on where and when you buy.

The renter's unrecoverable costs

Rent, plus renter's insurance if you have it. Rent usually rises over time, so build in an increase each year. The renter keeps the down payment invested instead.

A worked 7-year example

Assumptions (all illustrative):

• Home price $400,000, 20% down ($80,000), loan $320,000 at 6.5% over 30 years.
• Property tax $350 a month, insurance $150 a month.
• Maintenance $4,000 a year (1% of the price).
• The down payment would otherwise earn 5% a year, compounded yearly.
• Closing costs when buying are left out to keep it simple, which slightly flatters buying.
• Selling costs 6% of the sale price when you move after 7 years.
• Rent for a similar home: $2,200 a month, rising 3% a year.

Owner's costs over 7 years:

Item	Amount
Mortgage interest (from the calculator's schedule, years 1-7)	about $139,232
Property tax and insurance ($500 × 84 months)	$42,000
Maintenance ($4,000 × 7)	$28,000
Lost growth on the $80,000 down payment at 5%	about $32,568
Subtotal	about $241,800

Renter's costs over 7 years: about $202,289 in rent.

Now the big unknown: the home's value.

• If the home doesn't rise in value, the owner also pays 6% selling costs on $400,000 ($24,000), for a total of about $265,800. Renting is about $63,500 cheaper.
• If the home rises 3% a year, it's worth about $491,950 after 7 years: a gain of about $91,950, minus selling costs of about $29,517. The owner's net cost drops to about $179,367. Buying is about $22,900 cheaper.

Same house, same rent, and the answer flips on one assumption. That's the honest truth about rent vs buy: you're partly betting on prices, rates and how long you'll stay.

What tips the balance

• How long you'll stay. Buying and selling costs are large one-off costs. Spread over 3 years they hurt; over 10 years they matter much less. Short stays usually favour renting.
• The interest rate. Higher rates mean more interest in the early years, when payments are mostly interest. See the amortization schedule for why.
• Price compared with rent. Where homes are expensive relative to rents, renting tends to win on cost; where they're cheap relative to rents, buying does.
• What you'd really do with the money. The "invest the difference" argument only works if you actually invest it.
• Things money doesn't measure. Stability, school catchments, freedom to renovate, or the flexibility to move for a job.

How to run your own rent vs buy comparison

1. Open the free mortgage calculator. Enter the Home price, Down payment, Interest rate (yearly) and Loan term.
2. Open Taxes, insurance and fees (optional, per month) and enter Property tax, Home insurance and any HOA fees or PMI.
3. In the Repayment schedule, add up the Interest column for the years you expect to stay.
4. In the free compound interest calculator, enter your down payment as the Starting amount with an assumed return, set Compounded to Yearly (it starts on Monthly), and read the Interest earned after the same number of Years.
5. Add maintenance and buying and selling costs, then compare with total rent over the same years.
6. Repeat with a pessimistic and an optimistic home price change. If buying only wins in the optimistic case, it's a bet, not a sure thing.

Make the comparison

Start with the free mortgage calculator to get the interest and the monthly cost of owning, then add the other costs above. Everything runs in your browser, so nothing you type is sent anywhere. Once you're thinking of buying, how much house you can afford helps set a price range, and 15 vs 30 year mortgage helps pick the term.