Rent vs Buy Calculator

Rent vs. Buy: When Does Buying a Home Make Sense?

The rent vs. buy decision is one of the biggest financial choices you will make. Conventional wisdom says buying is always better, but the reality depends on your specific numbers, location, and how long you plan to stay.

When Renting Makes More Sense

• You plan to move within 3-5 years. Closing costs, selling commissions (typically 5-6%), and the slow equity buildup in early mortgage years mean short stays often favor renting.
• The price-to-rent ratio is high. If a home costs more than 20 times the annual rent for an equivalent property, renting is usually the better deal. In expensive cities like San Francisco or New York, this ratio can exceed 30x.
• You can invest the difference. If renting is cheaper monthly and you discipline yourself to invest the savings, stock market returns (historically around 7-10% annually) can outpace home appreciation.
• You value flexibility. Renting lets you move for job opportunities without the friction of selling a home.

When Buying Makes More Sense

• You will stay at least 5-7 years. This gives you time to recoup closing costs and build meaningful equity.
• Mortgage rates are low. Low rates dramatically reduce the cost of ownership and increase the equity you build each month.
• Rents are rising fast. If your area has 5%+ annual rent increases, locking in a fixed mortgage payment provides a hedge against inflation.
• You want forced savings. A mortgage payment builds equity automatically, while renters must be disciplined about investing their savings.

Costs People Often Forget

When comparing rent vs. buy, many people only compare the mortgage payment to rent. But homeownership comes with significant additional costs:

• Maintenance: Budget 1-2% of the home's value per year for upkeep, repairs, and eventual replacements.
• Property taxes: These can be $3,000-$15,000+ per year depending on your location.
• Opportunity cost: Your down payment could earn returns if invested elsewhere.
• Transaction costs: Buying and selling a home typically costs 8-10% of the price in closing costs and agent commissions.
• HOA fees: These can add $200-$500+ per month for condos and some neighborhoods.

The Break-Even Timeline

The "crossover year" shown in this calculator represents when the net cost of buying drops below the net cost of renting. If you plan to stay longer than the crossover year, buying is likely the better financial decision. If you plan to move sooner, renting probably wins.