Mortgage vs Rent Calculator

Comparing a mortgage to rent means looking past the monthly payment. The true cost of owning includes interest, taxes, insurance, maintenance, and the opportunity cost of a down payment locked up in equity instead of earning a return somewhere else.

True Monthly Cost of Owning:

Monthly Ownership Cost = Mortgage Payment + Property Tax + Insurance + HOA + Maintenance − Principal Repaid

The last term is the one people forget. Part of every mortgage payment is not spent, it is moved from your bank account into your house, so it should not be counted against renting.

You may see this formula written with a mortgage interest deduction subtracted as well. This calculator leaves it out on purpose. Since the US standard deduction roughly doubled in 2018, the large majority of filers take it rather than itemising, and for them the interest deduction is worth exactly nothing. Build it into your comparison only if you already know you itemise.

True Monthly Cost of Renting:

Monthly Renting Cost = Monthly Rent + Renter’s Insurance − Investment Return on Down Payment (opportunity cost)

The Price-to-Rent Ratio:

P/R Ratio = Home Price / (Annual Rent)

• P/R < 15: Buying is likely better
• P/R 15–20: Neutral zone
• P/R > 20: Renting is likely better financially

Worked Example:

• Home price: $380,000
• 20% down ($76,000), mortgage $304,000 at 7%, 30 yr
• Monthly mortgage = $2,023
• Property tax (1.2%/yr): $380 /month
• Insurance: $120/month
• Maintenance (1%/yr): $317/month
• Total: $2,840/month

Equivalent apartment rent: $2,200/month

Down payment invested at 7%: $76,000 × 7% / 12 = $443/month opportunity cost

Adjusted renting cost: $2,200 + $443 = $2,643/month

On these numbers owning costs $195.85 a month more than renting, not the $639 you get by comparing $2,840 against a bare $2,200. Yet the price-to-rent ratio is 14.4, which sits in the buying zone. Both readings are correct and they answer different questions: the monthly figure asks what leaves your account, the ratio asks whether the asset is cheap relative to what it rents for.

Then there is the part of the mortgage that is not a cost at all. In the first year of a $304,000 loan at 7%, $257.34 a month of the $2,022.52 payment goes to principal. That is money moving from one pocket to another, not money spent. Net it out and owning costs $2,581.85 against $2,643.33 to rent, so ownership is already the cheaper of the two. By year ten the principal share has more than doubled and the gap is decisive, before any appreciation at all.

Break-even analysis: owning pulls ahead once equity and appreciation outrun the transaction costs. In markets appreciating 3 to 5% a year, that typically lands at 4 to 8 years; in flat markets it can exceed 12. The reason it is years rather than months is the round trip: 2 to 5% of the price in closing costs going in, and around 6% in commissions coming out. Sell inside three years and those two alone will usually swamp whatever you saved monthly.

What none of this captures. Rent goes up and a fixed mortgage payment does not, which over a decade is the strongest financial argument for buying and the hardest to put in a monthly table. Against that, owning is illiquid, it ties you to one city, and the furnace is your problem. Run the numbers, then decide how long you plan to stay, because that answer moves the result more than any input on this page.