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Rent vs. Buy Calculator: Is Home Ownership Right for You?

The rent versus buy debate can get exceptionally heated. For some, renting for any longer than you have to is akin to setting fire to your hard-earned cash.

Others see home ownership not as the fulfillment of the American Dream but as a financial prison, limiting your mobility and liquidity, and sucking up money for interest, repairs, and taxes.

That’s where our rent versus buy calculator comes in.

It tells you, in the simplest terms, how long you need to stay in your home to break even, and how long you’ll need to stay before buying it becomes a serious money-saving decision.

Rent vs. Buy Calculator: Our Assumptions

For most of the numbers, we looked at national averages over the past 15 years.

Rental Market

For rent, we found a national average of 3% yearly increases, so we assumed rent prices would keep going up at that same rate into the future.

Real Estate Values

For year-over-year increases in home value, we found a national average of 3.5% (according to the Case-Shiller Home Price Index). Yes, you could make a fortune on a house whose value might shoot skyward. But the vast majority of home prices in the U.S. increase only a little faster than inflation.


For the past 15 years, inflation was low — 2.2% yearly. We used this number to calculate future costs like home maintenance.

Property Taxes

For property taxes, we assumed taxes equal to 1.5% of the home’s value, which is the national average.

Mortgage Interest, Insurance, and Tax Deductions

In calculating “costs,” we included the interest on your mortgage, but not the principal. For taxes, we included any mortgage tax deduction that exceeded the standard deduction. We also assumed that your tax filing status was “single” (no offense!).

We also factored in private mortgage insurance. If you’re unfamiliar, private mortgage insurance (PMI) is a special type of insurance that your mortgage lender requires you to get if you make a down payment of less than 20%. It tends to cost in the realm of $100 to $250 a month, and once you reach 20% equity of your home you no longer have to pay for it.

Read more:

  • First-Time Home Buyer’s Guide
  • How Much House Can You Afford?

About the author

Chris Butsch

Chris helps people build better lives through financial literacy. He has contributed to USA TODAY, Forbes and has worked as a senior contributor here on Money Under 30. He has covered topics such as taxes, credit card, investing, retirement, and more with a focus on helping Gen Z master personal finance.

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