'My mortgage would be lower than my rent' is one of the most common statements people make when deciding to buy. It is often true for the principal-and-interest component — but comparing a mortgage payment to a rent payment is not a complete comparison.
The buyer also pays property tax, homeowner's insurance, and ongoing maintenance — expenses the renter does not bear directly. Together, these typically add $500 to $1,200 per month on a $350,000 to $400,000 home, depending on location and condition.
The calculator above adds all these costs to both scenarios and compares net worth, not just monthly payments. Here is how the components break down.
Breaking down the buyer's true monthly cost
Principal and interest (P+I) is what most people call the mortgage payment. On a $280,000 loan — 80% of a $350,000 home — at 6.5% over 30 years, that is $1,771 per month, and it never changes. But it is not the complete picture.
Property tax in many U.S. states runs 0.8 to 1.5% of current home value annually. On a $350,000 home at 1.1%, that is approximately $321 per month — and it rises as the home appreciates. Homeowner's insurance adds roughly $100 to $200 per month. A maintenance reserve at 1% of home value costs about $292 per month. Total: approximately $2,684 per month in year 1, not $1,771.
What the renter's payment covers (and does not)
Rent is simpler: one payment, all housing costs included. No repair bills, no property tax surprises, no roof replacements. Renters trade the growth of equity for simplicity and flexibility. The financial risk the landlord absorbs — vacancy, maintenance, market value swings — is priced into the rent, which is part of why the price-to-rent ratio matters.
The renter's financial advantage is the down payment staying invested. On a $70,000 down payment (20% of $350,000) earning 5% annually, year-one investment income is $3,500 — roughly $292 per month working in the renter's favor. That implicit return offsets part of the renter's perceived disadvantage in building no equity.
The fixed-rate advantage over time
A 30-year fixed mortgage locks the P+I payment forever. As rents rise with inflation — approximately 3% per year historically — the buyer's core housing cost becomes a smaller and smaller fraction of household income. By year 15, the buyer's P+I is still $1,771, while the equivalent rent that started at $1,800 has grown to approximately $2,800.
This payment certainty is one of the most underappreciated benefits of fixed-rate mortgages. It converts housing from a variable cost to a fixed cost, making long-term financial planning significantly easier — and making the buyer's monthly surplus grow each year relative to the renter who faces rising lease costs.
Frequently asked questions
How do I compare a mortgage payment to rent fairly?
Add all recurring ownership costs to the P+I mortgage payment: property tax (divide annual amount by 12), homeowner's insurance (around $100–$250/month), and a maintenance reserve (1% of home value annually divided by 12 — about $333/month on a $400,000 home). That total is your fair monthly comparison to rent.
What is included in a mortgage payment?
A standard mortgage payment is P+I — principal (the loan paydown component) and interest (the lender's cost). Many lenders collect PITI: Principal, Interest, Taxes, and Insurance through an escrow account. Mortgage insurance (PMI) is also added if the down payment is under 20%. Note that the principal component is not a cost — it is a transfer to your equity.
Is a $2,000 mortgage the same as $2,000 rent?
No. The $2,000 mortgage P+I does not include taxes, insurance, or maintenance. Total ownership cost on a typical $350,000–$400,000 home runs $2,400–$2,800 per month. Comparing just the P+I to rent is not apples-to-apples. This calculator adds all costs to both sides.
What happens to my mortgage payment over time?
On a fixed-rate mortgage, the principal and interest payment never changes over the life of the loan. Property tax and insurance typically rise slightly with inflation and home appreciation. The overall effect is that housing becomes a smaller share of income as salaries grow — an advantage unavailable to renters who face periodic lease increases.
When does a mortgage become cheaper than rent?
In cash-flow terms, the mortgage payment typically falls below rent somewhere around year 8–12 in many U.S. markets at moderate rent growth (3% per year). In net-worth terms the crossover happens earlier, because equity begins building from day one. Your exact break-even year is shown in the calculator above.
Worked examples
Worked example 1
Monthly payment anatomy — $350,000 home
$350,000 home, 20% down, 6.5% rate, $1,800/month rent. Compare the full monthly ownership cost breakdown to rent.
Monthly mortgage
$1,770
Verdict
Buying wins
Break-even year
Year 6
The monthly mortgage payment of $1,770 looks close to the $1,800 rent — but add $292 property tax, $108 insurance, and $292 maintenance, and the true monthly ownership cost is roughly $2,461. The $661 gap is the monthly amount the renter invests.
What affects the result
Loan amount and interest rate
The P&I (principal and interest) payment is determined by loan amount and rate alone. At 6.5% on a $280,000 loan (80% of $350,000) the payment is $1,770/month. A 1% rate reduction saves about $162/month — worth roughly $58,000 over 30 years in total interest.
Property tax rate
Property tax varies enormously by location — from under 0.3% in Hawaii to over 2.5% in Illinois or New Jersey. On a $350k home, the difference between 0.5% and 2% property tax is $437/month. Always use your specific county rate.
PMI (private mortgage insurance)
If your down payment is below 20%, PMI adds 0.5–1.5% of the loan annually. On a $280,000 loan that is $117–350/month. PMI drops off automatically when you reach 20% equity, but it can significantly increase effective monthly cost in the early years.
More questions answered
What is included in a mortgage payment beyond principal and interest?
Your monthly mortgage payment (P&I) is just the loan repayment portion. Lenders often collect escrow for property tax and homeowners insurance, making PITI (principal, interest, taxes, insurance) the full payment. You also pay maintenance costs separately — budget 1% of home value per year. None of this appears in the headline mortgage rate or payment.
Is a $2,000 mortgage the same as $2,000 rent?
No. $2,000 rent is your all-in housing cost. A $2,000 mortgage (P&I) is only the loan repayment — you still owe property tax, insurance, maintenance, and possibly HOA on top. On a $400,000 home, those additions typically run $800–1,200/month, making the true ownership cost $2,800–3,200/month vs. $2,000 in rent.
How does my down payment affect my monthly payment?
Each 5% increase in down payment on a $350,000 home ($17,500) reduces the loan by $17,500. At 6.5%, this saves about $111/month in P&I. Additionally, getting to 20% down eliminates PMI. The trade-off is a larger cash outlay and more opportunity cost on invested capital.
Model assumptions & disclosures
Equal-budget method. Both buyer and renter are assumed to spend the same total amount each month. The person with the lower required outlay invests the monthly difference into a diversified portfolio at the specified annual return. The renter also invests the down payment and estimated closing costs at the start of the comparison period.
Nominal figures. All rates — home appreciation, rent growth, and investment return — are nominal (not inflation-adjusted). Comparisons are internally consistent on a nominal basis.
No tax effects. Mortgage interest deductibility, capital gains exclusion on home sales ($250k/$500k), and investment account tax treatment are not modelled. Since the 2017 Tax Cuts and Jobs Act, fewer than 10% of taxpayers itemise, so the mortgage interest deduction is omitted as a default. Consult a tax professional for your specific situation.
Selling costs applied at horizon end. When computing buyer net worth at your planning horizon, the calculator deducts the specified selling-cost percentage from the home’s projected market value, reflecting the realistic proceeds from a sale.
Not financial advice. This calculator provides illustrative projections based on your inputs. It does not account for personal circumstances such as job security, credit score, local market conditions, or individual tax situations. Consult a qualified financial advisor or real estate professional before making housing decisions.