Buy vs Rent Calculator – Decide Whether to Buy or Rent

Are you wondering if it’s better to buy a house or keep renting? Our Buy vs Rent Calculator helps you compare the total cost of buying and total cost of renting over a period of time so you can make an informed decision.

Formula 1: Total Cost of Buying

$\text{Total Buying Cost}=\text{Home Price}+(\text{Home Price}\times \text{Property Tax Rate}\times \text{Years})+(\text{Home Price}\times \text{Maintenance Rate}\times \text{Years})$

Formula 2: Total Cost of Renting

We assume rent increases every year by the annual rent increase rate.

$\text{Total Rent Cost}=\sum _{n=0}^{\text{Years}-1}\text{Rent}\times (1+\text{Rent Increase Rate}{)}^n\times 12$

Example Calculation

Let’s assume:

• Home Price = $300,000
• Property Tax = 1% (0.01)
• Maintenance = 1% (0.01)
• Rent per Month = $1500
• Years = 5
• Annual Rent Increase = 2% (0.02)

Step 1: Calculate Total Buying Cost

$\text{Total Buying Cost}=300,000+(300,000\times 0.01\times 5)+(300,000\times 0.01\times 5)=300,000+15,000+15,000=330,000$

Step 2: Calculate Total Rent Cost

Year by year rent:

Year 1:

$1500\times 12=18,000$

Year 2:

$1500\times 1.02\times 12=18,360$

Year 3:

$1500\times {1.02}^2\times 12=18,727.2$

Year 4:

$1500\times {1.02}^3\times 12=19,101.74$

Year 5:

$\text{Total Rent Cost}=18,000+18,360+18,727.2+19,101.74+19,483.78=93,672.72$

Conclusion

In this example:

• Total Buying Cost = $330,000
• Total Rent Cost = $93,672.72

Buying is more expensive over 5 years — but remember, you also own an asset after buying. Use the Buy vs Rent Calculator to adjust the numbers for your own situation and make a smart decision.