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Rent vs Buy a Home
Should you buy your first home or keep renting? This calculator plays out both paths (buying and building equity, or renting and investing the difference) and shows which one leaves you wealthier, year by year. Free and private. Nothing you enter leaves your browser.
Buying Side
Renting Side
Shared Assumptions
Net Worth After Your Horizon: Side by Side
Year by year
| Year | Buy: net worth if sold | Rent: portfolio value | Buy − Rent |
|---|
Buying your first home isn't automatically the right move, or the wrong one
If you're a first-time buyer, you've probably heard both speeches. One side says rent is "throwing money away" and a mortgage is forced savings. The other side points out that a huge share of an owner's monthly payment (interest, property tax, insurance, maintenance, condo fees) is thrown away just as surely as rent, and that a renter who invests their would-be down payment can quietly out-compound a homeowner.
Both stories can be true. Which one is true for you comes down to three things: how long you'll stay (buying has big one-time costs on the way in and out, so short stays punish owners), the price-to-rent ratio in your city (in some markets, renting the same home costs far less per month than owning it), and what you'd actually do with the money you didn't spend on a house (the comparison only favours renting if the savings really get invested, not absorbed into lifestyle).
This calculator runs the honest version of the comparison: it builds the buyer's net worth from equity (principal paid down plus price appreciation, minus the costs of getting in and out) and the renter's net worth from investing the buyer's upfront cash plus any monthly savings. Then it tells you the break-even year: the point where staying put makes buying the winner.
Pros & cons for a first-time buyer
Buying: pros
- Forced savings: every payment includes principal, so equity builds even if you're not disciplined
- Leverage: price gains apply to the whole home's value, not just your down payment
- Fixed-rate payments are inflation-resistant; rent rises every year forever
- Stability and control: renovate, get a dog, never face a landlord's notice to vacate
- Principal-residence gains get favourable tax treatment in both Canada and the US
Buying: cons
- Huge transaction costs: closing costs going in, ~5%+ commissions and fees coming out, brutal if you move within a few years
- "Phantom costs" most first-timers underestimate: interest, property tax, insurance, maintenance, condo fees build zero equity
- Under 20% down adds mortgage default insurance (CMHC premium in Canada, PMI in the US)
- Concentrated, illiquid bet on one property in one neighbourhood
- You're tied down: a great job in another city becomes a costly decision
Renting: pros
- Flexibility: move for work, school, or a relationship with a lease's notice, not a sale
- Your down-payment money can stay invested in a diversified portfolio instead of one address
- Predictable monthly cost: the furnace, roof, and special assessments are the landlord's problem
- Often much cheaper per month than owning the same home in expensive cities
- No transaction costs: trying a new city or neighbourhood is nearly free
Renting: cons
- No forced savings: the strategy only works if you actually invest the difference
- Rent typically rises every year, while a fixed mortgage payment doesn't
- Less security: renovictions, sales, and non-renewals can force a move you didn't choose
- No leverage on rising home prices: if your market booms, you're priced further out
- Limited control over your own space, from paint colours to pets
First-time buyer notes: Canada & USA
Canada: If you're saving for a first home, look at the FHSA (First Home Savings Account): contributions are tax-deductible (up to $8,000/yr, $40,000 lifetime) and qualifying withdrawals for a first home come out tax-free, with no repayment required. If your down payment is under 20%, your mortgage must be insured (CMHC or a private insurer); the one-time premium (roughly 2.8%–4.0% of the loan depending on your down payment) is normally added to your mortgage. Minimum down payments and insurance eligibility rules (including maximum home price) are set by the federal government and change over time.
USA: With less than 20% down on a conventional loan you'll typically pay PMI, private mortgage insurance of very roughly 0.5%–1% of the loan per year, which can usually be cancelled once you reach about 20% equity. FHA and other low-down-payment programs exist with their own insurance rules, and many states and cities offer first-time-buyer grants, tax credits, or assistance programs that vary widely.
General information only; programs, limits, and premium rates change. Verify the current rules with official sources (Canada.ca / CMHC, or your lender and state housing agency) before making decisions.
About this calculator
Enter the home you'd buy and the rent you'd pay instead. The calculator amortizes the mortgage month by month, grows the home's value, and charges the owner every carrying cost: interest, property tax, insurance, maintenance, condo fees, and mortgage default insurance where it applies. On the other path, the renter invests the buyer's upfront cash and every month's savings at your chosen return while rent rises annually. At each year end it values both paths (the buyer's equity after selling costs versus the renter's portfolio) and reports the winner, the gap, and the break-even year.
Rent vs buy FAQ
Is renting just throwing money away?
No. Rent buys you housing, the same way a large share of an owner's monthly payment buys housing rather than wealth: mortgage interest, property tax, insurance, maintenance, and condo fees all leave the owner's pocket and never come back. Only principal paydown and price appreciation build the owner's equity. The honest comparison is total net worth under each path: the owner's home equity versus what a renter would have if they invested the down payment, closing costs, and any monthly savings instead. Depending on prices, rents, rates, and how long you stay, either side can win.
How long should I plan to stay for buying to make sense?
Buying carries heavy one-time transaction costs (closing costs when you buy and agent commissions plus legal fees when you sell) that renting never charges. Those costs get spread over your years in the home, which is why a common rule of thumb says buying rarely pays off in under about five years. The break-even year this calculator reports is your personalized version of that rule: the first year that the buyer's net worth catches up to the renter's. If you might move sooner than that for work, school, or family, renting often wins even in a market where buying looks cheap.
What are CMHC insurance and PMI?
Both protect the lender, not you, when your down payment is under 20%. In Canada, mortgage default insurance (from CMHC or a private insurer) is a one-time premium of roughly 2.8% to 4.0% of the loan depending on your down payment, and it is normally added to your mortgage principal. In the USA, private mortgage insurance (PMI) on a conventional loan typically costs roughly 0.5% to 1% of the loan per year, paid monthly, and can usually be cancelled once you reach about 20% equity. This calculator applies both automatically as estimates; exact rates vary by insurer, credit score, and situation.
Does this calculator include first-time home buyer programs and taxes?
No. It deliberately keeps to the core buy-vs-rent math. It does not model income tax on the renter's investment gains, capital-gains treatment of a principal residence, land-transfer tax rebates, Canada's FHSA or Home Buyers' Plan, US mortgage-interest deductions, or state and provincial first-time-buyer programs. Those can shift the result in either direction, and the rules change often, so verify the current programs where you live before deciding.