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Rent Vs. Buy: Calculator And Decision Guide

Sidney Richardson6-Minute Read
November 08, 2022

If you’re looking for somewhere to live, you might be asking yourself the age-old question – should I rent or buy

Depending on your financial situation and other life factors, the decision to rent or buy a house could go either way. Can you afford it? Which would be more affordable in your situation? Are you throwing your money away by renting?

Let’s take a look at some of the pros and cons of renting vs. buying to help you make a more informed decision about which choice might be best for you.

Factors To Consider Beforehand

Before choosing to buy or rent, it’s important to consider all the personal and financial factors that may be impacting your situation. If you’re only planning to live in a place for a year, it makes more sense to rent than buy a house – but if you’re planning on staying in one area for a while and building wealth, buying a home and accruing equity might be the smarter investment.

What factors should you be considering? Let’s go over a few important things you might want to consider when making your choice.

Financial Stability

One of the biggest factors that will determine whether you should purchase a home is your financial stability. Owning a house tends to be more expensive overall than renting because there are additional expenses you’ll be responsible for handling beyond your mortgage payment, such as property taxes, utilities, maintenance or repairs, insurance and more.

You should also consider factors like your credit score, debt-to-income ratio (DTI) and how big of a down payment you could make, were you to purchase a home. There’s a common misconception that by renting a home instead of buying, you’re just throwing money away. If you can’t swing a down payment or your DTI and credit aren’t quite in shape, renting might be a better use of your money than a mortgage.

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Length Of Occupancy

The length of time you intend to live somewhere will also have a big impact on your decision to rent or buy. Like we mentioned earlier, if you know you’ll only be living in a certain area for a specific amount of time, you may not want to invest in a house, which is typically only beneficial as a longer-term investment.

If you’ve heard of the “5-year rule” or “5-year plan,” it states that homeowners should typically stay in their homes at least 5 years before selling if they hope to make money rather than pay to leave. This rule doesn’t always apply but is a good rule of thumb that you should keep in mind. If you don’t think you’ll be in a house for 5 years, it’s probably a better idea to rent.

Tax Savings

If length of occupancy isn’t a concern, you may also consider potential tax savings. If you buy a home, you can typically deduct your mortgage interest and real estate taxes when you file your taxes each year. As a renter, you don’t enjoy the same tax benefits. While tax benefits may not outweigh the extra costs of buying a home, they are a nice benefit if you’re still unsure about pulling the trigger on buying.

Investment Risk Vs. Reward

Investing in real estate can bring you some of the biggest financial gains of your life. Homes appreciate in value over time, and if you continually build equity in your house by making payments, you can hasten that future profit. When you rent, your payments go to a landlord – but when you buy a house, your monthly mortgage payments help you build equity which can actually make you money in the future, should you choose to sell your investment for a profit down the line.


How much do you have saved? When buying a home, depending on your loan type, you’ll likely need to make a down payment. While you can get a mortgage with a down payment as low as 3%, many strive to make a down payment of at least 20% to help build equity and, if you have a conventional loan, avoid paying for private mortgage insurance (PMI).

That can be a lot of money – 20% of a $200,000 house, for example, is $40,000 upfront. Even 5% of that same house would be $10,000. On top of a down payment, there are plenty of other closing costs you’ll be responsible for paying for, too – so before buying a home, you might want to make sure you have a considerable amount saved in preparation. 

Likelihood To Get Mortgage Approval 

Remember, to get approved for a mortgage loan you’ll need to meet a number of requirements. Your DTI can’t be too high, your credit must meet a minimum score, you’ll have to be employed … you get the picture. If your credit isn’t up to snuff or your savings could use some time to grow, it might be a better idea to rent for the time being.

Renting Vs. Buying Pros And Cons

There are pros and cons to both renting and buying a home. Let’s go through a few of each to help you weigh your options.

Pros Of Renting 

  • Fewer overall costs: When you rent, you’ll likely pay for your monthly rent, utilities, renters insurance and potentially some additional fees here and there – and that’s it. Keep in mind, rent controlled apartments also help you save money by limiting the amount that a landlord can charge for the rental unit. When you buy a home, there are a whole host of additional expenses you’ll be responsible that you don’t have to deal with while renting.
  • Flexibility: When you rent, your lease probably lasts somewhere between a few months and a year, sometimes more. This requires less commitment than purchasing a home. Renting makes it easier to move on when you need to because you’re not tied down to a mortgage.
  • Less maintenance and repair work. When you rent, your landlord or property management company will likely take care of most maintenance issues for you. For those that don’t want to deal with the responsibility of fixing household issues or tending to a lawn themselves, this can be a fantastic perk.

Cons Of Renting 

  • Rent can go up at any time: Your landlord could increase rent at any time. When you own a home, you have a better idea of what you’ll be paying each month on your mortgage – a privilege that you may not enjoy or have any control over if you’re renting.
  • No equity built: When you rent, your payments don’t build any equity. That means your money isn’t going toward an investment that you can benefit from in the future – it’s just leaving your pockets and going to your landlord.
  • There could be limiting rules and policies: Some apartment landlords don’t allow tenants to have pets or to paint their walls. There could be many freedoms that homeowners enjoy that you’ll be missing out on if you decide to rent.

Pros Of Buying

  • It’s an investment: When you buy a house, you build equity in it when you make payments. Should you sell that home someday when it’s appreciated in value, you have the potential to make a great deal of profit. Unlike renting, your payments go toward an investment that could benefit you in the future.
  • Freedom to decorate as you wish: One of the greatest benefits of paying for your own space is that you can do whatever you want with it. Want to paint your walls hot pink or neon green? Go for it. Thinking about renovating the kitchen? Knock yourself out.
  • Stability: When you buy a home, you get a space that is fully yours. That means more privacy than an apartment and more freedom to do what you want, when you want without fear of rising rent costs or landlord restrictions.

Cons Of Buying 

  • Lots of responsibility: When you buy a home, you have to do everything yourself. You’ll have to take care of your own yard, fix your own sink when it’s broken (or pay a plumber), you get the picture. Everything that you might take for granted as a renter will be on you to handle as a homeowner.
  • More expensive: There are many more hidden homeownership costs associated with buying compared to renting. When you buy a house, you’ll have to pay for the down payment, closing costs, insurance, etc., plus any taxes, repair costs and other potential financial drains.
  • You could lose money: While real estate tends to increase in value over time, if you default on your loan or end up underwater on your mortgage, you could actually stand to lose a lot of money on this large investment, which can be extremely detrimental to your finances and credit long term.

Rent Vs. Buy Calculator

There are many things that might impact your choice to buy or rent a house but knowing which option will be more expensive for you will likely be a deciding factor. To quickly calculate whether it would be financially smarter to rent or buy, use a rent vs. buy calculator. The calculator shows you how much you would save (or not) by renting instead of buying. It also will determine the appreciation and equity you will build, showing your true home value over time.

The final analysis will let you know how long you would need to stay in your home before selling to ensure a net gain when it comes to rent vs. buy.

The Bottom Line

So, is it better to rent or buy? The answer for you will depend completely on where you are in life and your financial situation. Before you decide to rent or buy a house, consider all the factors in this guide and what your homeownership goals are. Remember that it isn’t necessarily bad to rent – in many cases, it can be a smart choice as you build your savings and credit or move around for work or personal reasons.

For more help figuring out the path of your financial future, check out the Rocket HomesSM cost of living calculator.

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Sidney Richardson

Sidney Richardson is a professional writer for Rocket Companies in Detroit, Michigan who specializes in real estate, homeownership and personal finance content. She holds a bachelor's degree in journalism with a minor in advertising from Oakland University.