The decision to buy or rent is in no small part emotional. It involves considerations that are hard to put a number on. For instance, you can renovate only if you own. On the other hand, you can relax knowing a roof replacement isn't your problem only if you rent.
This tool sets those considerations aside and asks a simpler, more technical question: which is the better investment decision, buying or renting?
Let's explore.
Owning is generally more expensive per month than renting for at least the first decade (even with a significant down payment). In this analysis, during periods when renting is cheaper than owning, the savings from renting are invested in the market. Conversely, during periods when owning is cheaper than renting, the savings from owning are applied toward principal to pay off the mortgage sooner.
Gross occupancy cost
| Year | Own | Rent | Difference | |||
|---|---|---|---|---|---|---|
| Annual | Cumulative | Annual | Cumulative | Annual | Cumulative | |
| {{r.y}} | {{r.oa}} | {{r.oc}} | {{r.ra}} | {{r.rc}} | {{r.da}} | {{r.dc}} |
Year-1 monthly breakdown
Where the money goes over {{periodLabel}}
| Item | Own | Rent |
|---|---|---|
| {{r.label}}i | {{r.own}} | {{r.rent}} |
Now that we know how much it costs to own versus rent, we need to understand the value of the assets each path builds, using the same comparison. Owning builds value in the home through appreciation and paying down debt. Renting builds value by investing the amount saved by renting and letting it appreciate and compound through reinvested dividends.
What each path is worth if cashed out
Cumulative advantage of owning, by year
Net worth if you liquidated at each point
Each net outlay produces the following net cash from sale. Subtract net worth from net outlay and you get how much money (in nominal dollars) was effectively spent to live in the home after all is said and done.
Ending position at {{endLabel}}
| Item | Own | Rent |
|---|---|---|
| {{r.label}}i | {{r.own}} | {{r.rent}} |
{{s3.p1}}
{{s3.p2}}
Show the math
| Step | Own | Rent |
|---|---|---|
| {{r.label}} | {{r.own}} | {{r.rent}} |
All figures are nominal: no discounting, so a dollar in year {{s3.mathYrs}} counts the same as a dollar at closing.
{{s3.p3}}
Show the math
Discount rate i = {{s3.mathRate}} per month, the monthly equivalent of the portfolio’s {{s3.mathRateYr}} after-tax annual return. Hold period: {{s3.mathT}} months.
| Step | Own | Rent |
|---|---|---|
| {{r.label}} | {{r.own}} | {{r.rent}} |
Outflows are everything each path pays out each month: its occupancy costs plus the savings it sets aside. Because the cheaper path always invests the difference, both paths pay out the same amount in every month, so ① is identical for owning and renting and the whole gap comes from ②. Discounting each payment by its own date, not just the cash from sale, keeps both sides of the subtraction in today’s dollars. The annuity factor then converts that present value into the flat monthly payment worth the same amount today.
{{s3.p4}}
Inputs used
Tax savings schedule
Mortgage payment (PITI) by component over the loan term
Home value and loan-to-value (LTV)
How the model works
- Simulated monthly for 30 years. Home value compounds at (1 + inflation) × (1 + real appreciation) − 1. Rent, insurance, HOA, utilities and deduction thresholds step up once a year.
- Gross occupancy cost chart: CLOSE is the upfront cash (down payment and buyer closing costs to buy; the security deposit to rent), and each year after is the total paid that year. Owning includes principal and interest, PMI, property tax, insurance, HOA dues, repairs and maintenance, and utilities, net of income-tax savings. Renting includes rent, renter's insurance, utilities, and parking and amenity fees, which step up at each annual lease renewal.
- In the Compare view, the shaded waterfall adds each year's difference (own − rent) to the running total, so the top of the latest bar is the cumulative difference: the cash a renter could have invested by then. In the Own view, income-tax savings (itemizing plus any business-use savings, defined below) plot below zero, and the dashed Total line is the net cost after those savings. The table beneath the chart shows the same figures in thousands, with Difference = own − rent.
- Property tax is charged on assessed value, which grows at the lesser of home appreciation and the assessment cap. Maintenance is a percent of the home's current value.
- PMI applies below 20% down and is assumed to end once the loan-to-value ratio (outstanding loan balance ÷ current, appreciated home value) has stayed at or below 78% for six consecutive months. In practice, lenders cancel PMI automatically at 78% of the original purchase price; ending it earlier on the strength of appreciation usually requires a new appraisal and a request to the lender. The six-month waiting period is meant to approximate the cost of that appraisal and the lender's processing time before PMI is actually waived.
- Itemizing savings = marginal rate × the home-related deductions. By default ("Every deduction") each deductible dollar is valued at the marginal rate, assuming enough taxable income to use it all. The "Above std. deduction" method counts only itemized deductions beyond the standard deduction ($32,200 joint / $16,100 single in 2026, indexed), since a renter gets the standard deduction too. Mortgage interest is deductible on up to $750k of debt. PMI counts as interest from 2026, phasing out between $100k and $110k of AGI. Property tax shares the SALT cap with state income tax; the cap rises 1%/yr through 2029, phases down by 30% of AGI above about $505k, and can revert to $10k in 2030.
- Business-use savings apply only to a self-employed home office or a rented portion of the home. That share of interest, property tax, insurance, HOA, utilities, upkeep and PMI is deducted at the marginal rate, plus straight-line depreciation on the building (not land) share of the cost basis. Depreciation is recaptured at up to 25% on sale and is not sheltered by the primary-residence exclusion. W-2 employees cannot deduct a home office. Self-employment tax effects are not modeled.
- The renter invests the down payment and buyer closing costs, less the security deposit, on day one. Each month, whichever path costs less puts the difference to work: the renter invests it in the market; the owner first makes additional principal payments on the mortgage and invests in the market only once the loan is paid off. Dividends are taxed as received and reinvested; gains are taxed at liquidation.
- Security deposit: treated as a 100% loss at lease signing. It is paid at CLOSE, never refunded, and earns nothing, so it is simply a cost of renting.
- On sale, agent commissions and seller costs are deducted. Home gains above the primary-residence exclusion ($250k single / $500k joint, after two years) are taxed at the capital gains rate.
- Levelized occupancy cost (Step 3) takes the present value of every dollar each path puts out, meaning its occupancy costs plus the savings it sets aside, subtracts the present value of the net cash from sale at the end, and spreads the result over the hold period as a level monthly amount. Everything is discounted at the portfolio's after-tax return, so money spent early weighs more than money spent later.
- For illustration only, not tax, legal or investment advice. Replace the national defaults with local figures.