Educational content only — not financial advice

Rent vs Buy
Calculator

Compare the true total cost of homeownership vs renting, including hidden costs and limited tax benefits

Mortgages Don't Help Much

A 6% mortgage rate becomes ~4% effective rate after 30% tax deduction. But treasuries yield ~4% too. The "arbitrage" roughly cancels out — you're better off buying cash if you can.

Cash Purchase Model

This calculator assumes you pay cash for the house. The cost is the 3.5% APY you forgo (treasury rate), plus property tax, insurance, and HOA.

This Calculator's Assumptions

  • Cash purchase: Assumes you pay cash for the home. Mortgage interest deductions roughly cancel out with treasury yields, so we skip the complexity.
  • Opportunity cost at 3.5%: The money tied up in the house could earn this in treasuries risk-free. This is your true "cost of capital."
  • No home appreciation: Home value is assumed to stay flat. In reality, appreciation can significantly favor buying.
  • Maintenance not included: Budget separately for repairs and upkeep (typically 1-2% of home value per year).

These are opinionated assumptions. Your situation may differ — adjust as needed or consult a financial advisor.

Calculator

Enter your numbers to compare renting vs buying over time

Home Purchase (Cash)

Opportunity cost: 3.5% APY foregone

Note: Maintenance costs (typically 1-2% of home value/year) are not included. Factor this in separately.

Rental Costs

Monthly Comparison

Monthly Cost
Buy
$6,500/mo
Rent
$6,500/mo
Difference: + $0/mo to buy

Buy cost = opportunity cost (3.5%) + property tax + insurance + HOA

Roughly Equal
Difference is only $0/month
Monthly Buy Cost (Cash Purchase)
Opportunity Cost (3.5% APY) $4,375
Property Tax $1,875
Insurance $250
Total Monthly Cost $6,500
Breakeven Rent $6,500/mo
Monthly Rent Cost
Monthly Rent $6,500
Breakeven Home Price $1,500,000
Home Price
$1,500,000
Monthly Buy Cost
$6,500
Yearly Opportunity Cost (3.5% on $1500K)
$52,500/year
Remember to budget separately for maintenance (typically 1-2% of home value per year).

The True Cost of Homeownership

Ongoing Homeowner Costs

  • Mortgage Principal + Interest — Major monthly payment
  • Property Tax — 1-3% of home value annually, NOT tax deductible
  • Home Insurance — Required by lender
  • Maintenance — Budget 1-2% of home value yearly
  • HOA Fees — If applicable, often increasing
  • Opportunity Cost — Down payment not invested

Renter Costs

  • Monthly Rent — Typically increases 3-5%/year
  • No maintenance costs
  • No property tax
  • Flexibility to move
  • Can invest down payment — In stocks/bonds

The Tax Deduction Myth

Mortgage Interest Deduction is Limited

  • • Only deductible on the first $750,000 of mortgage debt
  • • Only beneficial if you itemize deductions
  • • Standard deduction is $29,200 (MFJ) — you only benefit from interest above this amount
  • • Interest payments decline over time as you pay down principal

Property Tax is Essentially NOT Deductible

  • • SALT cap limits state + local taxes to $10,000 total
  • • For high earners, state income tax alone often hits the $10K cap
  • • Example: $500K income in California = ~$50K state tax, but only $10K deductible
  • • Your property tax provides zero additional federal benefit

Bottom Line

Don't buy a house "for the tax benefits." For most high earners, the only real tax benefit is mortgage interest on debt up to $750K, and only if that interest plus other itemized deductions exceeds the standard deduction. Property tax provides zero benefit.

Important Disclaimer

This calculator is for educational purposes only. Real estate decisions depend on many factors not included here: local market conditions, personal circumstances, career stability, lifestyle preferences, and more. Always consult with a financial advisor before making major financial decisions.