Compare the full 10-year cost of renting versus buying — including investment returns on a renter's saved down payment — so you can see which path actually builds more wealth.
The mortgage quote comes in at $1,950 a month and your rent is $1,950, so buying feels like a wash — same payment, except now you build equity. That intuition has talked a lot of people into the wrong decision. It ignores the $38,000 down payment that stops earning anything the day you wire it, the maintenance that renting never charges you for, and whether your market actually appreciates. This calculator does the full ten-year accounting on both sides — including what the renter's down payment earns if they invest it instead.
Inputs include both sides of the ledger: Monthly Rent, Annual Rent Increase, and Renter's Insurance on the rent side; Home Price, Down Payment, Mortgage Rate, Property Tax, Home Insurance, and Home Appreciation on the buy side. The investment return field lets you model what a renter could earn by investing the down payment instead of using it on a purchase.
Why monthly payment comparison misses the point
A $1,950 mortgage and a $1,950 rent payment look identical on a budget sheet. They are not. The mortgage payment includes principal — which builds equity — and interest, which does not. The down payment is capital deployed and no longer earning investment returns. Property tax, insurance, and maintenance add to monthly housing cost above the mortgage payment. Over 10 years, these differences compound into a materially different outcome.
On the rent side, the down payment stays liquid. If the renter invests it at a 7% annual return, that capital grows significantly over the same period. The calculator uses your Investment Return (if renting and investing) input to model that growth alongside the cumulative renting cost — including annual rent increases. The comparison is total 10-year wealth position, not month-to-month payment.
Annual Rent Increase matters enormously in this model. A 4% annual rent increase on a $1,950 starting rent means the renter pays $2,887 per month in year 10. The buyer's principal and interest payment is fixed for a 30-year mortgage — it does not inflate. Over a decade, the rent increase erodes the renter's initial advantage in many markets. The calculator runs this math explicitly.
What the buying side actually costs
The total cost of buying over 10 years includes mortgage interest paid, property taxes, homeowner's insurance, and maintenance costs. On a $380,000 home at a 6.8% mortgage rate with a 10% down payment, annual interest in year one alone runs roughly $23,000 — a cost that is invisible in a mortgage-payment comparison but very real. The calculator builds this into the 10-year comparison.
Home Appreciation (%) per year is the buy side's major wealth-building variable. A home appreciating at 4% annually turns a $380,000 purchase into a $561,000 asset at year 10. Combined with principal paydown, the buyer's equity grows from $38,000 at purchase to roughly $165,000 by year 10. That equity gain is what makes buying financially competitive with renting-and-investing in many markets — and what makes it clearly worse than renting in markets with flat or declining appreciation.
Maintenance cost is often left out of rent-versus-buy comparisons entirely. The common rule of thumb — 1–2% of home value annually — puts maintenance at $3,800–$7,600 per year on a $380,000 home. Over 10 years, that is $38,000–$76,000 in additional cost that renting does not carry. The calculator captures maintenance as part of the annual owning cost.
The investment return on the down payment: the renter's counterweight
The most undermodeled factor in rent-versus-buy comparisons is what happens to the down payment if the buyer does not deploy it. A $38,000 down payment invested at a 7% annual return grows to roughly $74,800 over 10 years — an $36,800 gain that represents the opportunity cost of using that capital for a home purchase.
The Investment Return input lets you specify what you believe the renter could realistically earn. Conservative investors using index funds have historically earned 6–8% annually before taxes. A renter who invests the down payment in money markets or bonds might earn 4–5%. A renter who does not invest the down payment at all earns 0% — and in that scenario, buying almost always builds more wealth simply by forcing savings through equity.
The comparison output shows the renter's total wealth position — savings invested plus net housing cost — alongside the buyer's total wealth position — equity minus total cost — at the 10-year mark. This is the number that answers the question rather than the monthly payment comparison.
How local market conditions change the answer
Rent-versus-buy outcomes differ dramatically by market. In high-appreciation markets like coastal metro areas, buying almost always wins the 10-year comparison because home appreciation outpaces investment returns and the forced savings of equity paydown are substantial. In flat markets where home prices have grown less than 2% annually over the past decade, the renter who invests the down payment often comes out ahead.
The Rent Increase percentage is also market-dependent. In markets with high rent growth — cities with housing supply constraints — annual rent increases of 5–7% dramatically favor buying because the fixed mortgage payment becomes relatively more attractive each year. In markets where rent is stable, the flexibility of renting carries more weight.
The calculator does not predict which market you are in — it models the outcomes at whatever appreciation and rent increase rates you enter. Run it with your market's recent historical rates as inputs, then consider whether the next decade is likely to look like the last one. The point is to replace a gut-feel decision with a scenario-based comparison.
When renting is the rational choice
Renting beats buying in the 10-year model when: home appreciation is low (below 2% annually in most market conditions), rent increases are modest (below 3%), the investment return on the down payment is high, or the buying costs — particularly mortgage rate and property tax — are elevated relative to comparable rent. Markets with property tax rates above 2% significantly increase the annual cost of ownership.
Renting also wins on scenarios that the financial model does not capture: when the buyer might need to move within 5 years (transaction costs of buying and selling eat the appreciation), when the down payment represents a major portion of liquid savings (removing emergency fund flexibility), or when the buyer would be stretching to qualify for a mortgage at a payment that creates cash flow stress. The financial model is one input, not the only one — but it is the one that most buyers skip.
How to use it
- Enter Monthly Rent and Annual Rent Increase (%) to build the rental cost projection.
- Set Renter's Insurance and Investment Return (if renting and investing) to complete the renter's scenario.
- Enter Home Price, Down Payment (%), Mortgage Rate (%), and Loan Term on the buying side.
- Fill in Property Tax (annual), Home Insurance (annual), and Home Appreciation (%/yr).
- Read the 10-year total cost and wealth comparison for each path and identify the breakeven year.
Who it's for
- First-time buyer deciding whether to buy now or wait — Compares buying at a 7.1% mortgage rate versus renting another 2 years and investing the down payment, checking 10-year wealth position for each.
- Renter in a high-rent-growth market — Models 5% annual rent increases against a fixed mortgage to see at which year the buyer's total cost falls below the renter's cumulative cost.
- Buyer with a large down payment evaluating opportunity cost — Enters a $120,000 down payment and models what that capital earns at 7% investment return versus the equity it builds at 3% home appreciation.
- Person considering relocation to a new market — Runs the model with destination market rent levels, home prices, property tax rates, and local appreciation estimates before deciding whether to rent on arrival.
- Couple with a 3-year time horizon — Reduces the comparison to 3 years by running the model at conservatively low appreciation, checking whether transaction costs and limited appreciation time make buying irrational.
Key terms
- Down payment opportunity cost
- The investment return foregone by using capital for a home purchase rather than investing it elsewhere.
- Annual rent increase
- The percentage by which rent grows each year — a primary driver of the long-run rent-versus-buy comparison.
- Break-even year
- The point in time when the buyer's total cumulative cost falls below the renter's total cumulative cost, marking when buying becomes financially advantageous.
- Home appreciation
- The annual percentage increase in a property's market value — the primary wealth-building mechanism on the buying side of the comparison.
Frequently asked questions
What investment return should I use for the renter's down payment?
For a long-term, diversified portfolio, 6–8% annual return has been a realistic range historically. Conservative investors or those holding short-duration bonds or high-yield savings should use 4–5%. If you genuinely would not invest the down payment — spending it instead — use 0%, which dramatically changes the comparison in favor of buying.
Does this model account for the mortgage interest tax deduction?
The calculator does not factor in the mortgage interest deduction. For homeowners who itemize deductions, this deduction reduces the effective after-tax cost of mortgage interest. If you are likely to itemize, the buying side is modestly better than the tool shows — subtract your estimated annual tax savings from the buying cost to adjust.
What home appreciation rate is realistic?
US home prices have appreciated roughly 3–4% annually on average over long periods, though with enormous regional variation. Some coastal markets have averaged 5–7% over the last decade; some Midwest markets have averaged 2–3%. Use your specific market's recent trend rather than a national average for a more relevant comparison.
Why does Annual Rent Increase matter so much in this model?
Over 10 years, compounding rent increases significantly inflate the renter's total cost. A 4% annual rent increase on $1,800 monthly rent means the renter is paying $2,663 in year 10 and has paid roughly $258,000 total over the decade. A buyer's fixed mortgage payment is the same in year 10 as year 1 — the gap between rising rent and fixed mortgage cost is one of buying's strongest long-run arguments.
Is this model appropriate for deciding whether to buy an investment property?
This model is designed for primary residence rent-versus-buy decisions. For investment property analysis, use the Rental Property ROI Calculator, which accounts for rental income, cap rate, and cash-on-cash return from the investor's perspective rather than the occupant's.