# Rent vs. Buy Calculator

> Compares the net cost of renting with the net cost of buying a home over a chosen number of years: rent with annual increases versus mortgage payments, property tax, maintenance, transaction costs and the opportunity cost of the upfront cash, net of the equity recovered when the home is sold.

- Calculator id: `rent-vs-buy` · Category: Finance (`finance`) · Tool name: `compare_rent_vs_buy`
- Canonical page: https://tttkmbb.com/finance/rent-vs-buy · This document: https://tttkmbb.com/finance/rent-vs-buy.md · JSON definition: https://tttkmbb.com/finance/rent-vs-buy.json

## Purpose

Compares the net cost of renting with the net cost of buying a home over a chosen number of years: rent with annual increases versus mortgage payments, property tax, maintenance, transaction costs and the opportunity cost of the upfront cash, net of the equity recovered when the home is sold.

**Use when:** You want a first-order comparison of renting against buying for a given horizon, rate, appreciation and investment-return assumption.

**Do not use when:** You need tax deductions, rent-controlled scenarios or month-by-month cash-flow modelling; the model is annual and simplified. For the mortgage payment alone use mortgage-payment.

## Input

| Parameter | Type | Unit | Required | Description |
| --- | --- | --- | --- | --- |
| `monthly_rent` | number |  | required | Rent today for a comparable home. (> 0, max 1000000) |
| `rent_growth_percent` | number | %/year | optional, default 3 | Yearly rent growth in percent. (min -10, max 30) |
| `home_price` | number |  | required | Purchase price of the home. (> 0, max 10000000000) |
| `down_payment` | number |  | required | Cash paid at purchase; the rest is financed. (min 0, max 10000000000) |
| `annual_rate_percent` | number | % | required | Fixed annual mortgage rate in percent. (min 0, max 100) |
| `term_years` | number | years | optional, default 30 | Mortgage term in years. (> 0, max 50) |
| `property_tax_percent` | number | % of value/year | optional, default 1.2 | Annual property tax as a percent of the home's value that year. (min 0, max 10) |
| `maintenance_percent` | number | % of value/year | optional, default 1 | Annual upkeep, insurance and association dues as a percent of the home's value that year. (min 0, max 10) |
| `home_appreciation_percent` | number | %/year | optional, default 3 | Yearly growth of the home's value in percent. (min -20, max 30) |
| `investment_return_percent` | number | %/year | optional, default 7 | Annual return the renter could earn on the down payment and closing costs instead. (min -50, max 50) |
| `years` | integer | years | required | How many years you expect to stay before selling or moving. (min 1, max 40) |
| `buying_closing_costs_percent` | number | % of price | optional, default 3 | One-off purchase costs (lender fees, title, transfer tax) as a percent of the price. (min 0, max 15) |
| `selling_costs_percent` | number | % of sale price | optional, default 6 | Agent commission and other costs when selling, as a percent of the sale price. (min 0, max 15) |

## Output

| Field | Type | Unit | Description |
| --- | --- | --- | --- |
| `total_cost_of_renting` | number |  | Sum of rent over the horizon with annual increases. |
| `total_cost_of_buying` | number |  | Upfront cash + mortgage payments + tax and maintenance + opportunity cost of upfront cash − net equity at sale. |
| `net_advantage_of_buying` | number |  | total_cost_of_renting − total_cost_of_buying (positive = buying is cheaper over the horizon). |
| `better_option` | string |  | 'Buying' or 'Renting' under these assumptions. |
| `monthly_principal_and_interest` | number |  | Level monthly payment on home_price − down_payment. |
| `total_mortgage_payments` | number |  | P&I × months in the horizon (capped at the loan term). |
| `total_property_tax_and_maintenance` | number |  | Σ home value at the start of each year × (property_tax_percent + maintenance_percent)/100. |
| `upfront_cash` | number |  | down_payment + buying closing costs. |
| `opportunity_cost_of_upfront_cash` | number |  | upfront_cash × ((1 + investment_return)^years − 1): return the renter would have earned on that cash. |
| `home_value_at_end` | number |  | home_price × (1 + appreciation)^years. |
| `loan_balance_at_end` | number |  | Remaining mortgage principal after the horizon. |
| `net_equity_at_sale` | number |  | home_value_at_end × (1 − selling_costs_percent/100) − loan_balance_at_end. |
| `average_monthly_cost_of_renting` | number |  | total_cost_of_renting / months. |
| `average_monthly_cost_of_buying` | number |  | total_cost_of_buying / months. |

## Formula

`rent_total = Σ_{y=0}^{years−1} 12 × monthly_rent × (1 + g)^y. loan = home_price − down_payment; P&I from the annuity formula; value_y = home_price × (1 + a)^y; ownership_costs = Σ value_y × (tax% + maintenance%)/100; upfront = down_payment + closing% × home_price; opportunity = upfront × ((1 + r)^years − 1); equity = value_years × (1 − selling%) − balance_after(12 × years); buy_total = upfront + P&I × months + ownership_costs + opportunity − equity; advantage = rent_total − buy_total`

Annual model with costs based on the home value at the start of each year. It ignores income-tax effects (mortgage-interest deduction, capital-gains exclusion), renter's insurance, and the investment of any monthly cash-flow difference between the two options; only the upfront cash is treated as invested. Results are sensitive to the appreciation and return assumptions.

## Data Sources

- CFPB – Owning a Home: loan costs and monthly payment components — https://www.consumerfinance.gov/owning-a-home/ (government, retrieved 2026-09-24)
- Wikipedia – Opportunity cost — https://en.wikipedia.org/wiki/Opportunity_cost (reference, retrieved 2026-09-24)
- Wikipedia – Mortgage loan — https://en.wikipedia.org/wiki/Mortgage_loan (reference, retrieved 2026-09-24)

Data freshness: `static`. Deterministic formula with fixed constants; results never go stale. Inputs supplied by the caller determine the output.

## API

- `GET https://tttkmbb.com/api/v1/calculate/rent-vs-buy?monthly_rent=…&home_price=…&down_payment=…&annual_rate_percent=…&years=…`
- `POST https://tttkmbb.com/api/v1/calculate/rent-vs-buy` with JSON body `{"inputs": {…}}`
- Response: unified envelope (`success`, `request`, `result.values`, `result.units`, `sources`, `freshness`, `timestamp`, `next_actions`, `links`); see https://tttkmbb.com/docs/response-format.md
- Schema: https://tttkmbb.com/api/v1/calculators/rent-vs-buy · OpenAPI operationId `compare_rent_vs_buy` in https://tttkmbb.com/openapi.json
- Authentication: none. Rate limit: fair use, see https://tttkmbb.com/docs/rate-limits.md.

## MCP

- Server: `https://tttkmbb.com/mcp` (Streamable HTTP, JSON-RPC 2.0, no auth)
- Tool:  `run_calculator` with `{"calculator_id": "rent-vs-buy", "inputs": {…}}`

## Example

- Rent 2,000 vs 400,000 home, 80,000 down, 6.5 %, 10 years: inputs `{"monthly_rent":2000,"rent_growth_percent":3,"home_price":400000,"down_payment":80000,"annual_rate_percent":6.5,"term_years":30,"property_tax_percent":1.2,"maintenance_percent":1,"home_appreciation_percent":3,"investment_return_percent":7,"years":10}` → `{"total_cost_of_renting":275133.1,"total_cost_of_buying":290545.23,"net_advantage_of_buying":-15412.13,"better_option":"Renting","monthly_principal_and_interest":2022.62,"total_mortgage_payments":242714.12,"total_property_tax_and_maintenance":100882.14,"upfront_cash":92000,"opportunity_cost_of_upfront_cash":88977.92,"home_value_at_end":537566.55,"loan_balance_at_end":271283.6,"net_equity_at_sale":234028.95}`
- Rent 2,500 vs 350,000 home, 70,000 down, 5.5 %, 4 % appreciation, 15 years: inputs `{"monthly_rent":2500,"home_price":350000,"down_payment":70000,"annual_rate_percent":5.5,"home_appreciation_percent":4,"investment_return_percent":6,"years":15}` → `{"total_cost_of_renting":557967.42,"total_cost_of_buying":235331.02,"net_advantage_of_buying":322636.4,"better_option":"Buying","monthly_principal_and_interest":1589.81,"net_equity_at_sale":397939.2,"average_monthly_cost_of_renting":3099.82,"average_monthly_cost_of_buying":1307.39}`

```
GET https://tttkmbb.com/api/v1/calculate/rent-vs-buy?monthly_rent=2000&rent_growth_percent=3&home_price=400000&down_payment=80000&annual_rate_percent=6.5&term_years=30&property_tax_percent=1.2&maintenance_percent=1&home_appreciation_percent=3&investment_return_percent=7&years=10
```

## Limitations

You need tax deductions, rent-controlled scenarios or month-by-month cash-flow modelling; the model is annual and simplified. For the mortgage payment alone use mortgage-payment. Annual model with costs based on the home value at the start of each year. It ignores income-tax effects (mortgage-interest deduction, capital-gains exclusion), renter's insurance, and the investment of any monthly cash-flow difference between the two options; only the upfront cash is treated as invested. Results are sensitive to the appreciation and return assumptions. All values are computed from the formula above; no measurement or live data is involved.

## FAQ

**Why does a short horizon favour renting?**

Buying and selling cost roughly 9 % of the price in this model (3 % + 6 %), and early mortgage payments are mostly interest, so equity builds slowly; those fixed costs need several years of appreciation and rent growth to be recovered.

**What is the opportunity cost line?**

The down payment and closing costs could have been invested. Their forgone return (not the principal, which the buyer recovers as equity) is counted as a cost of buying.

**Which return should I assume?**

Use the same basis for both sides: a nominal investment return with nominal appreciation and rent growth. Long-run US figures are roughly 7 % for equities, 3–4 % for house prices and 3 % for rents, but local values vary widely.

## Related

- [Mortgage Payment Calculator](https://tttkmbb.com/finance/mortgage-payment.md) — Full monthly payment with taxes and insurance.
- [Compound Interest Calculator](https://tttkmbb.com/finance/compound-interest.md) — Growth of the down payment if invested instead.
- [Inflation Calculator](https://tttkmbb.com/finance/inflation.md) — Express future amounts in today's money.