Rent vs. buy
Which choice costs less over time?
Compare the money that leaves your pocket and the equity that stays with you. Change the horizon; the answer often changes with it.
Your two options
What this model assumes
- Buying costs 3% of the price at closing and 6% to sell at the end.
- Cash that would go to the down payment and closing costs is instead invested at 7% a year if you rent. That opportunity cost is subtracted from the renter's total.
- PMI of 0.5% of the loan per year applies when the down payment is under 20%, until the balance falls to 80% of the price.
- Property tax and maintenance track the home's value. Insurance and HOA dues rise 3% a year.
- Net cost for buying = cash out (down payment, closing, and every monthly cost) minus what you net when you sell. Mortgage interest tax deductions are not included.
Over 7 years
Too close to call
After 7 years the two paths are within $2,009 of each other. Buying overtakes renting in year 8.
At the end of year 7
- Home value
- $491,950
- Loan balance
- $289,332
- Equity
- $202,618
- Cash back after 6% selling costs
- $173,101
Net cost over time
| Years | Rent | Buy |
|---|---|---|
| 1 | $22,360 | $55,615 |
| 3 | $68,314 | $94,011 |
| 5 | $115,868 | $131,178 |
| 7 | $164,947 | $166,956 |
| 10 | $241,182 | $217,617 |
| 15 | $373,818 | $292,174 |
| 20 | $509,856 | $350,537 |
| 30 | $761,845 | $392,761 |
Why the answer depends on how long you stay
Buying has large up-front and exit costs: closing fees going in and selling costs coming out. Those costs have to be spread over enough years of ownership to pay off, which is why short stays usually favor renting.
Over longer stays, the loan balance shrinks, the home may appreciate, and rent keeps rising while a fixed-rate mortgage payment stays put. That is what usually moves the break-even point in buying’s favor.
The calculator also charges buying for what the down payment could have earned elsewhere. If you rent, that cash stays invested, and its growth is credited against your rent. Change the assumptions to match your own situation, and treat the result as a comparison, not a forecast. It does not include income tax effects, so your results may differ if you itemize deductions.