Rent vs Buy Calculator
Monthly buying cost with tax and insurance against rent, with the gap.
What it does
Rent checks and mortgage slips rarely compare directly, because ownership bundles loan, tax, and insurance into one larger figure. A $400,000 home at 20% down and 6.5% costs $2,539.28 a month once 1.1% tax and $1,800 insurance join the loan payment. The tool above sets that beside any rent.
The default gap favors renting by $539.28 a month at $2,000 rent. Raise the comparison rent to $3,000 and the sign flips to -$460.72, meaning buying runs cheaper month to month. Neither result settles the choice; each frames what ownership truly charges before equity enters.
Federal homebuyer guides price the same bundle: partial loan repayment plus interest plus taxes plus insurance, with maintenance and repairs waiting behind them. Rent, in contrast, can rise at renewal while a fixed loan payment holds its line for decades. Both sides carry risks the other avoids.
Use this page as the opening comparison, not the verdict. Run your rent, your price, and your local tax rate, then weigh the gap against how long you will stay, since selling within a few years can erase early equity through transaction costs.
How to use
- Type the monthly rent you would otherwise pay.
- Type the home price with down payment percent.
- Set the mortgage rate and loan term.
- Add yearly property tax percent and insurance dollars.
- Read buying cost first, then the signed gap.
Formula
- r, n
- Monthly rate and month count of the loan.
- tax
- Yearly property tax as percent of price.
- gap
- Buy minus rent; plus favors renting, minus favors buying.
Principal and interest follow standard amortization with monthly compounding. Maintenance, HOA dues, and mortgage insurance sit outside the sum, so real ownership runs higher.
Worked example
Example: $400,000 home versus $2,000 rent
Defaults: rent 2000, price 400000, down 20, rate 6.5, 30 years, tax 1.1, insurance 1800.
- Loan: 400,000 x 0.80 = $320,000. Rate per month: 0.065 / 12.
- P&I: 320,000 x 0.0054167 / (1 minus 1.0054167^-360) = $2,022.62.
- Tax: 400,000 x 0.011 / 12 = $366.67. Insurance: 1,800 / 12 = $150.00.
- Buy: 2,022.62 + 366.67 + 150.00 = $2,539.28.
- Tool shows $2,539.28, $2,000.00, +$539.28/mo.
Reference table
| Rent | Buy | Gap |
|---|---|---|
| $2,000 | $2,539.28 | +$539.28/mo |
| $2,500 | $2,539.28 | +$39.28/mo |
| $3,000 | $2,539.28 | -$460.72/mo |
Limits
- Monthly cash flow only; equity ignored.
- No maintenance, HOA, or mortgage insurance included.
- Fixed rate assumed for the whole term.
- Rent treated as flat; renewals usually rise.
Common mistakes
- Comparing loan payment alone against rent.
- Forgetting tax and insurance inside ownership.
- Ignoring transaction costs on short stays.
- Assuming rent never rises.
- Reading a small gap as a full decision.
Try it yourself
Quick checks. Answers sit tucked under each question.
$250,000 home, 10% down, 7%, 30 yr, tax 1%, ins $1,200 vs $1,500 rent?
Buy $1,805.26, rent $1,500.00, gap +$305.26/mo.
$600,000 home, 20% down, 6%, 15 yr, tax 1.2%, ins $2,400 vs $3,000 rent?
Buy $4,850.51, rent $3,000.00, gap +$1,850.51/mo.
Same $400,000 default home vs $3,000 rent?
Buy $2,539.28, gap -$460.72/mo, buying cheaper monthly.
Questions
What does buying cost monthly here?
$2,539.28: $2,022.62 loan plus $366.67 tax plus $150 insurance.
Does buying build equity?
Yes, slowly at first, but this page counts cash flow only.
Why add tax and insurance?
Lenders collect them with the payment, so they are real monthly cost.
What if I move in 2 years?
Selling costs can erase early equity; renting often wins short stays.
Is a minus gap good for buying?
It means buying runs cheaper month to month than that rent.
Where do repairs fit?
Outside this sum. Budget about 1% of price yearly extra.