Is It Better to Rent or Buy? A Financial Calculator. (2024)

The Upshot

By Mike Bostock,Shan Carter,Archie Tse and Francesca Paris

The choice between buying a home and renting one is among the biggest financial decisions that many adults make. But the costs of buying are more varied and complicated than for renting, making it hard to tell which is a better deal.

To help you answer this question, our calculator, which was updated in May 2024 to reflect current tax law, takes the most important costs associated with buying or renting and compares the two options. Note that the “winning choice” is the one that makes more financial sense over the long run, not necessarily what you can afford today. And there are plenty of reasons you might want to rent or buy that are not financial — all we can help you with is the numbers.

Renting saves you

Buying saves you

Renting and buying are equal

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Renting saves you

Buying saves you

Renting and buying are equal

Costs after



Initial costs

Recurring costs

Opportunity costs

Net proceeds


How to Read the Charts Charts where the colors are similar indicate factors that are not particularly important. Conversely, the factors that have a wide range of colors have a large impact.

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The Basics

Adjust these numbers to get an estimate for your situation. These are some of the most important factors in your decision, and they’re the only ones we can’t estimate for you.

Home Price, if You Buy

A very important factor, but not the only one. Our estimate will improve as you enter more details below.

Monthly Rent, if You Rent

Setting a target rent allows for a direct comparison of potential costs.

How Long Do You Plan to Stay?

Buying tends to be more appealing the longer you stay because the upfront fees are spread over many years.

What Are Your Mortgage Details?

The calculator assumes you have a fixed-rate mortgage. It also calculates your main opportunity cost of buying — the amount you could have earned by investing the down payment instead — and checks whether you can take advantage of the mortgage-interest tax deduction.

Mortgage rate ?

For a fixed-rate loan.

per month

Advanced Options

Some of these inputs will matter a lot, and others less. We’ve filled in some reasonable guesses for you to start.

What Does the Future Hold?

How much home prices, rents and stock prices change can have a large impact on your outcome. Unfortunately, these are some of the hardest things to predict and can vary significantly across the country.

Home price growth rate ?

If this rate is equal to inflation, that means the value of your home will rise in line with other costs.


Property taxes and mortgage-interest costs are significant but also deductible. The higher your marginal tax rate, the bigger the deduction. But if your house-related deductions are smaller than the standard deduction, you won’t see any relative tax benefit from buying.

Note that the calculator assumes savings in line with current tax laws: The 2017 Tax Cuts and Jobs Act increased the standard deduction, while reducing the maximum deductions on property taxes (part of what’s known as the SALT deduction) and mortgage interest. These provisions are set to expire in 2025, but could be renewed or modified by Congress.

How you file your taxes: ?

The first $250,000 of profit from the sale of your home is excluded from taxation. The exclusion is $500,000 if you file jointly with a spouse. See IRS Topic 701 for more information.

Property tax rate ?

Amount you will pay each year, expressed as a percentage of the home value. These rates are set locally and can often be found on state or city websites.

for first year

Assume the 2017 Tax Cuts and Jobs Act will: ?

The calculator default assumes that these tax cuts will expire, but they could be renewed. These are just two possible scenarios out of many to help you understand the impact of tax law on your decision.

Closing Costs

You’ll have to pay a set of one-time fees when you buy your home, and also when you sell it.

Costs of buying home ?

Closing costs when the home is purchased, expressed as a percentage of the home price.

Maintenance and Fees

Owning a home comes with a variety of expenses, including fixing things and paying certain utility bills. The calculator assumes these costs will increase over time with inflation.

Maintenance/renovation ?

The annual amount you will spend for maintaining, repairing or renovating your home. Enter as a percentage of your purchase price.

first year

Additional Renting Costs

These are the costs on top of rent, such as the fee you pay to a broker and the opportunity cost on your security deposit. But these expenses typically have a negligible impact.

Security deposit ?

The number of months of rent that the landlord will keep as a security deposit.


The calculator keeps a running tally of the most common expenses of owning and renting. It also takes into account something known as opportunity cost — for example, the return you could have earned by investing your money. (Instead of spending it on a down payment, for example.) The calculator assumes that the profit you would have made in your investments would be taxed as long-term capital gains and adjusts the bottom line accordingly. The calculator tabulates opportunity costs for all parts of buying and renting. All figures are in current dollars.

Tax law regarding deductions can have a significant effect on the relative benefits of buying. The calculator assumes that the house-related tax provisions in the Tax Cuts and Jobs Act of 2017 will expire after 2025, as written into law. Congress might, however, extend the cuts in their original form, or extend and modify them. You can use the toggle to see how your results may vary if the tax cuts are renewed in full, to get a sense of how big the tax impact might be on your decision.


Initial costs are the costs you incur when you go to the closing for the home you are purchasing. This includes the down payment and other fees.

Recurring costs are expenses you will have to pay monthly or yearly in owning your home. These include mortgage payments; condo fees (or other community living fees); maintenance and renovation costs; property taxes; and homeowner’s insurance. A few items are tax deductible, up to a point: property taxes; the interest part of the mortgage payment; and, in some cases, a portion of the common charges. The resulting tax savings are accounted for in the buying total. If your house-related deductions are similar to or smaller than the standard deduction, you’ll get little or no relative tax savings from buying. If your house-related deductions are large enough to make itemizing worthwhile, we only count as savings the amount above the standard deduction.

Opportunity costs are calculated for the initial purchase costs and for the recurring costs. That will give you an idea of how much you could have made if you had invested your money instead of buying your home.

Net proceeds is the amount of money you receive from the sale of your home minus the closing costs, which includes the broker’s commission and other fees, the remaining principal balance that you pay to your mortgage bank and any tax you have to pay on profit that exceeds your capital gains exclusion. If your total is negative, it means you have done very well: You made enough of a profit that it covered not only the cost of your home, but also all of your recurring expenses.


Initial costs include the rent security deposit and, if applicable, the broker’s fee.

Recurring costs include the monthly rent and the cost of renter’s insurance.

Opportunity costs are calculated each year for both your initial costs and your recurring costs.

Net proceeds include the return of the rental security deposit, which typically occurs at the end of a lease.

Is It Better to Rent or Buy? A Financial Calculator. (2024)


Is it better to rent or own financially? ›

Owners come out ahead of In at least seven major cities in California, long-term renting is cheaper than owning a home. Renters save $900,540 on average in California over a 30-year period. in at least 51 U.S. cities. On average, owners saved $175,811 over a 30-year period.

What is the 5 percent rule in rent vs buy? ›

Take the value of the home you are considering, multiply it by 5%, and divide by 12 months. If you can rent for less than that, renting may be a sensible financial decision. For example, you could estimate about $25,000 in annual, unrecoverable costs for a $500,000 home, or $2,083 per month. It goes the other way, too.

Is it more cost effective to buy or rent? ›

For those weighing whether they should rent or buy a home right now, all signs point to renting as the more cost-effective option in most major U.S. cities, according to a new Bankrate analysis. Nationwide, the typical home costs nearly 37 percent more to buy than to rent on a monthly basis.

Is it smarter to rent or buy? ›

Renting a home provides much more flexibility. However, if you have returned to the office, either full time or partially, and assume you'll remain in your current job for a few years, then buying a home might be wiser.

Is renting really throwing money away? ›

That's not true. In fact, the top-selling financial author of all-time, Robert Kiyosaki, says, “A home is a liability, not an asset.” An asset puts money into your pocket every month. A home takes money out of your pocket every month. Some say, “Paying rent is like throwing money away.” That's not true either.

Do millionaires buy or rent? ›

Millionaires Are Renting Homes Over Buying — Is This a Good Option for the Middle Class? Even the ultra-wealthy don't want to deal with homeownership costs. The number of millionaire renters has soared over the last five years, according to a recent report by Beauchamp Estates.

What is the 50% rent rule? ›

The rule suggests that about half of the property's rental income should cover expenses, and the other half is an estimate of the property's net operating income (NOI). The 50% rule is a starting point and not a strict formula. Different property types, locations, and market conditions can affect actual expenses.

What is the rule of thumb for rent vs buy? ›

The price-to-rent ratio: Take a monthly rent figure and multiply it by 12, so it's an annual number. Divide the purchase price of a similar property by that annual rent number. A ratio greater than 20 generally weighs in favor of renting, while a figure less than 20 generally favors buying.

Is the 30% rent rule realistic? ›

In response to the question, “Is the 30% income rule for rent still realistic in 2024?”, there's no one-size-fits-all answer. “The 30% rule is a good starting point,” Dowski said, “but it's important to consider your specific circ*mstances and make choices that work best for you.”

Why buying is still better than renting? ›

Homeownership brings intangible benefits, such as a sense of stability and pride of ownership, along with the tangible ones of tax deductions and equity. Renting doesn't mean you're throwing away money every month, and owning doesn't always help you build wealth in the long run.

Is renting cheaper than buying in 2024? ›

Nationwide, the typical home costs nearly 37% more to buy than to rent on a monthly basis. The national average interest rate for 30-year mortgages was 7.33% as of April 17, 2024.

What are the cons of renting? ›

Reasons not to rent
  • Unable to enjoy tax deductions.
  • Your rent will most likely grow from year to year.
  • You're not building equity.
  • More difficult and expensive to have pets.

Why is it smart to rent? ›

One of the biggest perks of renting is that you never have to worry about surprise repair costs. It's cheaper in the short term. Besides having virtually no maintenance costs in an apartment, renters insurance is way cheaper than insuring a home.

Is it ever a good idea to rent? ›

However, for those who want to avoid the hassles associated with homeownership, the costs of upkeep, and property taxes, renting might be a better option. Of course, it depends on an individual's lifestyle, financial situation, what they can afford to pay in monthly rent, and whether they're working or in retirement.

Is homeownership worth it? ›

Owning a Home Helps You Achieve Financial Success

“. . . homeownership is a catalyst for building wealth for people from all walks of life. A monthly mortgage payment is often considered a forced savings account that helps homeowners build a net worth about 40 times higher than that of a renter.”

Is it financially smart to own a house? ›

If you're financially stable and need a place to live, buying a home can be a great investment. With a fixed mortgage rate, you could stop pouring money into rent, start building equity and enjoy the tax deductions that come with being a homeowner.

What percent of your income should go to rent? ›

It is recommended that you spend 30% of your monthly income on rent at maximum, and to consider all the factors involved in your budget, including additional rental costs like renters insurance or your initial security deposit.

Is it hard to live on your own financially? ›

You'll be paying out of pocket for everything from rent and utilities to travel and groceries—all of which have increased in cost over the past few years. Creating a budget you can actually follow is the key to living successfully on your own. Budget making doesn't have to be difficult.

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