The core comparison
Deciding between renting and buying is one of the biggest financial choices you'll make. This calculator strips away the complexity and shows you the monthly bottom line for each option, so you can see which is cheaper in pure dollar terms.
How it works
You enter details about the home you're considering, your financing terms, and the monthly rent in your area. The calculator then computes your total monthly mortgage payment (combining principal and interest), adds your share of annual property tax, and compares that to rent.
The mortgage portion uses a standard amortization formula—the same one lenders use. It spreads your loan across the term you choose, with interest front-loaded in early payments. Property tax is divided by 12 to give a monthly figure. Rent is entered as-is.
The formula
Monthly payment = [P × r(1+r)^n] / [(1+r)^n - 1] + (Annual property tax / 12)
Where P is the loan amount (home price minus down payment), r is the monthly interest rate (annual rate ÷ 12), and n is the total number of payments (years × 12).
Worked example
Let's say you're looking at a $350,000 home:
- Home price: $350,000
- Down payment: 15% = $52,500 → Loan amount = $297,500
- Interest rate: 4.5% per year → 0.375% per month
- Term: 30 years = 360 payments
- Annual property tax: $4,200
- Monthly rent in the area: $2,100
Mortgage calculation:
- Monthly rate: 0.045 ÷ 12 = 0.00375
- Numerator: 297,500 × 0.00375 × (1.00375)^360 = 297,500 × 0.00375 × 3.8477 ≈ 4,303
- Denominator: (1.00375)^360 − 1 = 2.8477
- Monthly mortgage payment: 4,303 ÷ 2.8477 ≈ $1,511
Property tax (monthly): $4,200 ÷ 12 = $350
Total monthly cost to buy: $1,511 + $350 = $1,861
Monthly rent: $2,100
Difference: Buying costs $239 less per month than renting. Over 30 years, that's $86,040 in savings—though you'd also build home equity, while rent builds none.
Things to watch
This calculator shows monthly cost only. Before committing to a purchase, remember:
- Upfront costs: Closing costs (2–5% of home price) are due at signing and aren't in this monthly figure.
- Maintenance and repairs: Budget 1–2% of home value annually. A $350,000 home might need $3,500–$7,000 per year in upkeep.
- Flexibility: Renters can move more easily; buyers are locked in for years.
- Market timing: If you're buying in a rising market, equity grows; in a falling market, you risk owing more than the home is worth.
- Rent inflation: Rent usually rises 2–4% yearly, while a fixed-rate mortgage stays the same. Over 10 years, this shifts the comparison.
This comparison is an estimate to help you think through the financial picture. Consult a mortgage broker, tax advisor, or real estate professional before making a final decision.