About & Methodology
Who built this and how the calculator works
Who We Are
Rent vs Buy is a free tool built by an independent amateur software developer and his wife. We built this calculator because we faced the rent-vs-buy decision ourselves and found the available tools either too simple (ignoring key costs) or too complex (burying the key insight in spreadsheet noise). Hence, we wanted to create something that could help others debating this question.
We have no financial relationships with lenders, real estate agents, or anyone else who profits from your decision. No referrals, no commissions. We're not trying to sell you a mortgage or convince you to buy or rent. We just want to help you think clearly about a big decision.
What the Calculator Does
The calculator runs two parallel wealth simulations over your chosen time horizon and finds where they intersect (the break-even year):
- Buyer scenario: Models home appreciation, mortgage amortization, property taxes, insurance, HOA, maintenance, PMI, closing costs, and selling costs. Accounts for the mortgage interest deduction if you itemize.
- Renter scenario:Models rent with annual increases, renter's insurance, and — critically — the investment returns on the down payment and monthly savings that result from not buying.
The "wealth delta" at each year represents the difference in projected net worth between the buyer and the renter-who-invests. A positive delta means buying has built more wealth by that year; a negative delta means renting-and-investing has.
Key Assumptions and Simplifications
No calculator can perfectly model something as complex as a real estate market and a 30-year financial horizon. Here are the key simplifications we make, and why they matter:
- Constant appreciation rate: We apply your chosen home appreciation rate uniformly each year. Real markets are volatile — some years see appreciation of 10%, others see declines. Our model uses a smooth average.
- Constant investment return rate: Similarly, we apply a uniform annual investment return. Stock markets are variable, and sequence-of-returns risk (getting bad returns early) can significantly affect outcomes.
- Tax calculations are simplified:We model the mortgage interest deduction based on whether you're likely to itemize (by comparing your estimated itemizable deductions to the standard deduction), but individual tax situations can be far more complex. Consult a tax advisor for your specific situation.
- No leverage on investment returns: The renter scenario invests the down payment and savings in an unleveraged portfolio. Homeownership uses leverage (you control a $500,000 asset with $50,000 down). This amplifies both gains and losses from price changes.
- Maintenance costs are constant: We use the 1% annual rule as a default. In practice, maintenance spending is lumpy and unpredictable.
Data Sources
We don't pull live data — all inputs are provided by you. But the default values we suggest are informed by authoritative sources:
- Home appreciation rates: The Case-Shiller Home Price Index, tracked by the Federal Reserve Bank of St. Louis (FRED) as series USSTHPI.
- Investment return assumptions:Long-run S&P 500 historical total returns, widely documented in academic and financial literature.
- Rent inflation: Bureau of Labor Statistics (BLS) Consumer Price Index, shelter component (series CUSR0000SAH1).
- Tax brackets and deductions: IRS Publication 505, IRS Topic 701 (capital gains exclusion), and current federal tax rate schedules.
Contact
Questions, feedback, or bug reports? We'd love to hear from you.
Disclaimer: This website is for informational purposes only and does not constitute financial, investment, or legal advice. All results are estimates based on simplified assumptions and user-provided inputs. Actual costs, returns, and outcomes will vary. Please consult a qualified financial advisor before making any real estate or investment decisions.