Buy vs Rent Advanced Calculator Formula

Understand the math behind the buy vs rent advanced calculator. Each variable explained with a worked example.

Use the Buy vs Rent Advanced Calculator

Formulas Used

Total Cost of Buying

buy_total = total_owner_cost

Home Value After Period

home_future_val = future_value

Appreciation Gain

equity_gain = future_value - home_price

Total Rent Paid

rent_total = total_rent

Monthly Mortgage (P&I)

monthly_payment = monthly_mortgage

Down Payment Required

down_pay = down_payment

Variables

VariableDescriptionDefault
home_priceHome Purchase Price(USD)400000
down_payment_pctDown Payment(%)20
mortgage_rateMortgage Rate(%)6.5
annual_taxesAnnual Property Taxes(USD)5000
annual_insuranceAnnual Insurance(USD)1800
annual_maintenance_pctAnnual Maintenance (% of price)(%)1
monthly_rentComparable Monthly Rent(USD)2200
annual_rent_increaseAnnual Rent Increase(%)3
yearsTime Horizon (years)7
appreciation_rateAnnual Home Appreciation(%)3
down_paymentDerived value= home_price * down_payment_pct / 100calculated
loan_amountDerived value= home_price - down_paymentcalculated
monthly_rateDerived value= mortgage_rate / 100 / 12calculated
num_paymentsDerived value= 30 * 12calculated
monthly_mortgageDerived value= monthly_rate > 0 ? loan_amount * monthly_rate * pow(1 + monthly_rate, num_payments) / (pow(1 + monthly_rate, num_payments) - 1) : loan_amount / num_paymentscalculated
total_mortgage_paidDerived value= monthly_mortgage * years * 12calculated
annual_maintenanceDerived value= home_price * annual_maintenance_pct / 100calculated
total_owner_costDerived value= down_payment + total_mortgage_paid + (annual_taxes + annual_insurance + annual_maintenance) * yearscalculated
future_valueDerived value= home_price * pow(1 + appreciation_rate / 100, years)calculated
total_rentDerived value= annual_rent_increase > 0 ? monthly_rent * 12 * ((pow(1 + annual_rent_increase / 100, years) - 1) / (annual_rent_increase / 100)) : monthly_rent * 12 * yearscalculated

How It Works

Buy vs Rent Comparison

Deciding whether to buy or rent depends on how long you plan to stay, local price-to-rent ratios, your opportunity cost of capital, and personal lifestyle preferences.

Buying Costs

  • Down payment (opportunity cost of locked capital)
  • Monthly mortgage payments (principal + interest)
  • Property taxes, insurance, and maintenance
  • Closing costs at purchase and sale

    • Renting Costs

  • Monthly rent (increasing over time)
  • Renter's insurance (relatively small)
  • No maintenance or tax obligations
  • Savings from not making a down payment can be invested

    • General Guidelines

  • Buying generally wins if you stay 5+ years in most markets
  • High price-to-rent ratios favor renting
  • The break-even horizon depends heavily on appreciation and rent growth rates

    • Worked Example

    A $400,000 home with 20% down at 6.5% vs. renting at $2,200/month with 3% annual rent increases, over a 7-year horizon with 3% appreciation.

    home_price = 400000down_payment_pct = 20mortgage_rate = 6.5annual_taxes = 5000annual_insurance = 1800annual_maintenance_pct = 1monthly_rent = 2200annual_rent_increase = 3years = 7appreciation_rate = 3
    1. 01Down payment: $400,000 x 20% = $80,000
    2. 02Loan amount: $320,000
    3. 03Monthly mortgage (30-yr): approximately $2,023
    4. 04Total mortgage over 7 years: $2,023 x 84 = $169,932
    5. 05Total taxes + insurance + maintenance: ($5,000 + $1,800 + $4,000) x 7 = $75,600
    6. 06Total buying cost: $80,000 + $169,932 + $75,600 = $325,532
    7. 07Home value after 7 years: $400,000 x 1.03^7 = $491,918
    8. 08Total rent paid: approximately $197,045

    Ready to run the numbers?

    Open Buy vs Rent Advanced Calculator