The real cost of buying
Buying isn't just a mortgage payment. You also pay property taxes (typically 1–1.5% of value annually), homeowners insurance, maintenance and repairs (budget 1–2% of value per year), and closing costs (2–5% of the purchase price). These add thousands per year on top of your mortgage.
The real cost of renting
Renting's true cost is not just the rent check. The other major factor is opportunity cost — the down payment you didn't deploy into a home could instead be invested in the stock market. This calculator factors in potential investment returns on that capital, which can significantly favor renting over shorter time frames.
The 5% rule of thumb
A quick heuristic: if annual rent is less than 5% of the home purchase price, renting is likely smarter financially. On a $400,000 home, 5% = $20,000/year or $1,667/month. If you can rent a comparable place for less, renting may win — especially for shorter stays.
Non-financial factors
The calculator can't capture everything. Buying offers stability, freedom to renovate, and can be a forced savings vehicle. Renting offers flexibility, mobility, and no surprise repair bills. Many people buy when they're ready to put down roots, regardless of the pure math.