Should you rent or buy?

It totals every dollar you spend or gain in each scenario over your chosen horizon. Buying costs include mortgage payments, property tax, insurance, maintenance and transaction costs (closing costs when you buy, selling costs when you sell). Against that it credits home equity built through principal paydown and appreciation. Renting costs include rent payments that grow with inflation, plus the investment return you earn by keeping the down payment invested instead of tying it up in a home. Whichever scenario leaves you with more net worth at the end of the horizon wins.

The crossover point is the year when cumulative buying costs dip below cumulative renting costs for the first time. Before that year, renting is ahead. After it, buying is ahead. The longer you stay, the more likely buying wins — because transaction costs are fixed one-time hits while appreciation compounds every year.

If you buy, your down payment is locked in the home. If you rent, that same money could be invested and earning returns. The opportunity cost is what that invested sum would grow to over your horizon — it is a real cost of buying even though you never write a check for it. This calculator lets you set the expected investment return so you can see how sensitive the comparison is to that assumption.

Appreciation is the single biggest variable in the rent-vs-buy comparison. At 3% annual appreciation a $400,000 home gains roughly $65,000 in value over five years. At 5% it gains over $110,000. Run the calculator at 2%, 3% and 4% to see how the crossover year shifts — that range tells you how much uncertainty you are accepting when you decide to buy.

In markets where home prices are very high relative to rents (high price-to-rent ratio), the mortgage payment plus carrying costs can exceed rent by enough that even strong appreciation does not overcome the gap. Renting also wins when investment returns on the down payment are high, when you move frequently (transaction costs reset the clock each time), or when rent growth is very low.