Created by Tomasz Jedynak, PhD
Reviewed by Bogna Szyk and Adena Benn
Last updated: Jun 05, 2023

The rent or buy calculator is designed for everyone who wonders whether it is better to rent or buy a house. We made this calculator to help people like you choose between renting and buying. With our easy-to-use rent vs. buy calculator, you can be sure that you will make the right decision.

• If you are in a hurry and want to obtain the approximate results quickly – fill in the fields in our calculator and compare the answers.

• If you have more time and prefer to comprehend the calculations – read the text below and try the advanced mode. After this, the question “Should I buy a house?” would have been resolved.

For most of us, the choice between renting and buying a home is one of the most serious financial decisions. We are wondering what is more profitable when we (or our child) go to university, when we move to another city, or when we think about moving to a bigger home.

The estimation of renting costs is quite simple, as you can see in our prorated rent calculator, and you don’t need any specialized knowledge to do it. However, as you will see in the next section, a few things that should be taken into account might be surprising.

The computation of the total costs of buying is complicated by the cost of the mortgage. It requires not only some understanding of financial mathematics but also a vast knowledge of different variables that should be considered in the calculations. Don’t worry, though – our rent or buy calculator takes into account the most important factors associated with buying a house and will help you make the right decision.

## How do we calculate the costs of renting and buying?

To compare the costs of buying and costs of renting, in the calculator, we consider two scenarios:

• Scenario 1. At the beginning of the simulation, you move to a new city and start renting a home. At the same time, you put all the money you have into a saving account. During the period of the analysis, every month, you pay the rent and receive interest from your savings account. You just move out and leave the city at the end of the time horizon.

• Scenario 2. At the beginning of the simulation, you move to a new city and buy a home. To finance the transaction, you take a mortgage. All the money you have is a down payment. Every month you have to pay installments from your mortgage. In addition, you have to cover the additional costs like annual property tax and homeowner’s insurance. At the end of the time horizon, you sell the home, which price (thanks to appreciation) is now probably higher than at the beginning, and repay the mortgage. After that, you spend one part of this money on repaying the mortgage; the rest is your profit.

## Costs of renting a home

Here you have an explanation of all variables that our rent or buy calculator takes into account while computing the costs of renting a home.

• Rent price – the price you pay to the property owner on a weekly, monthly, or yearly basis. This value shouldn’t contain the utility costs. As we mentioned above, these costs are more or less the same in the case of buying and renting, so our calculator excludes them.
• Agent commission – the one-off payment you pay to your estate agent.
• Other costs – all other costs related to renting a home (e.g. costs of moving in, minor apartment adjustments, extra furniture, renter's insurance, and so on).
• Interest rate (deposit) – the average yearly deposit interest rate in your bank. You can calculate it with our APY calculator. Moreover, if you plan to spend all the “money you have”, just enter zero.

## Costs of buying and owning a home

In this section, we explain the variables that affect the total cost of purchasing a home in our rent vs. buy calculator.

• Cost of the property – the total cost of purchase and adaptation of the property.
• Interest rate (mortgage) – your mortgage rate for a fixed-rate loan. You can check it in your bank or estimate it with our mortgage calculator. If you are not sure, leave the default value, which we set on the basis of the [

30 years fixed mortgage rates in the United States.]()

• Loan term – the time within which you have to pay back the loan (usually 30 years).
• Appreciation – the annual growth rate of the home value, a concept that we applied at our future value calculator.
• Other fees – other fees related to buying and owning a house. For simplification, they are expressed as a percentage of the value of the property. The most important are listed below. If you are unsure what to enter here, you can use our approximate values for the average property.
• Annual property tax – 1.3% per annum
• Homeowner's insurance – 0.5% per annum
• Home repairs and renovations – 0.5% per annum
• Buying and selling commissions - real estate agent commission, title insurance, loan origination fees, and transfer taxes – 4% and 7%, respectively.

## How to use our rent or buy calculator?

1. First of all, you have to define the time horizon of the analysis. The staying period is a period in which you are planning to stay at home until you move out (or sell the home).
2. Secondly, you have to assess how much money you have. When buying a home, this money will serve as your down payment*. In the case of renting, the calculator assumes that you will put this money in the saving account.
3. Provide the necessary information in the Rent and in the Buy parts of the calculator (for details, see the section Cost of renting a home and Costs of buying and owning a home).
4. Compare the results! Our calculator presents them in two ways:
• In the fields Rent cost and Buy cost, we present the monthly (or weekly and yearly) cost of renting and buying. We skipped the utility costs to simplify the calculations. We assumed that these costs are more or less the same in buying and renting and shouldn’t influence your decision.
• In the fields Total rent cost and Total buy cost, we compare the overall cost of renting and buying within the whole period. These values are also compared in the graph.

Total rent cost is a simple sum of all monthly payments to the owner, agent commission, and others fees minus the money you will earn on the savings account.

Total buy cost is a sum of all payments made during the staying period increased by an amount of unpaid mortgage and decreased by the value of the property at the end of the set time horizon. If the calculator shows a value below zero, it means that you will earn on buying!

*Down payment is cash you pay upfront when buying a home. Usually, you need to have at least 20% of the property value in cash. Otherwise, you may be forced to buy additional mortgage insurance.

## Should I buy a house? More factors to consider

Have you ever wondered whether renting or buying a house is better?

If you visit this site, then your answer is probably yes. Every day, thousands of people around the world are asking the same question. Our calculator is designed to help you make the right choice. However, you must remember that in real life, there is no single answer to the question, “Should I rent or buy?”

Firstly, most of the factors considered in financial calculations change values over time. This is also the case with our buy or rent calculator. For example, interest rates depend on the situation in the financial market, and the price of rent or home appreciation is related to the direction of the real estate market.

Secondly, it is important where you want to live. Choosing the high-priced areas may cause renting to be the only option. Conversely, in low-priced districts, it is usually more profitable to buy a house and sell it after a few years. Moreover, when choosing the location, you should remember that price is not the only variable you should take into account. Factors like the neighborhood, proximity to schools, health center, public transport, or nearby parks and green areas also counts.

Thirdly, besides the factors that can be quantified, the buy or rent decision should also be based on qualitative factors and other additional assumptions you need to make. Before buying, among others, you should consider the following:

• The possibility of making a decision (usually renting means that you are dependent on the landlord’s decision),
• Flexibility (as a renter, it is easier to move out and change your home),
• Financial predictability (mortgage payments are usually constant, while rent payments may vary over time),
• The possibility of unrestricted renovation and adaptation.

Last but not least – the pride of ownership also counts!

Tomasz Jedynak, PhD
Staying period
yrs
mos
Money you have
$Rent Rent price$/
mo
Agent commision
$Rent cost$/
mo
Total rent cost
$Buy Cost of the property$
Interest rate (mortgage)
%
Loan term
yrs
mos
$/ mo Total buy cost$
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