Rent vs Buy Calculator Formula
Understand the math behind the rent vs buy calculator. Each variable explained with a worked example.
Formulas Used
Total Rent Cost
total_rent = monthly_rent * years * 12Total Mortgage Payments
total_mortgage_payments = monthly_mortgage * years * 12Monthly Mortgage Payment
monthly_mortgage_out = monthly_mortgageMonthly Difference (Buy - Rent)
monthly_difference = monthly_mortgage - monthly_rentVariables
| Variable | Description | Default |
|---|---|---|
monthly_rent | Monthly Rent(USD) | 1800 |
home_price | Home Price(USD) | 350000 |
down_percent | Down Payment(%) | 20 |
mortgage_rate | Mortgage Rate(%) | 6.5 |
years | Time Period(years) | 7 |
down_payment | Derived value= home_price * down_percent / 100 | calculated |
loan | Derived value= home_price - down_payment | calculated |
mr | Derived value= mortgage_rate / 12 / 100 | calculated |
n | Derived value= 360 | calculated |
monthly_mortgage | Derived value= mr > 0 ? loan * mr * pow(1 + mr, n) / (pow(1 + mr, n) - 1) : loan / n | calculated |
How It Works
Rent vs Buy Comparison
This compares the monthly cost of renting vs a 30-year mortgage payment. A complete analysis would also consider property taxes, insurance, maintenance, appreciation, and tax benefits.
Rule of thumb: If the price-to-rent ratio (home price / annual rent) is above 20, renting is likely better financially.
Worked Example
$1,800/month rent vs $350,000 home with 20% down at 6.5%.
monthly_rent = 1800home_price = 350000down_percent = 20mortgage_rate = 6.5years = 7
- 01Down payment = $70,000, Loan = $280,000
- 02Monthly mortgage = $1,770
- 03Over 7 years: Rent = $151,200, Mortgage payments = $148,680
- 04Monthly mortgage is $30 less than rent
Ready to run the numbers?
Open Rent vs Buy Calculator