Compare the full cost of renting versus buying over the years you plan to stay, factoring in equity, appreciation, and carrying costs.
Should You Rent or Buy?
Renting versus buying is not just about comparing a monthly payment to rent. Buying carries large upfront costs and ongoing expenses like taxes and maintenance, but builds equity and benefits from appreciation. Renting is more flexible and frees your down payment to be invested elsewhere. The right answer depends heavily on how long you stay.
What This Calculator Includes
For buying, it accounts for the down payment, roughly 3% in closing costs, mortgage principal and interest, and ongoing carrying costs of about 2.6% of the home's value per year for property tax, insurance, and maintenance. At the end it credits you the home's appreciated value (assuming 3% per year) minus the remaining loan and 6% selling costs. For renting, it sums rent rising 3% per year and credits you the growth from investing your down payment and closing costs at 6%.
The Break-Even Horizon
Because buying front-loads big costs, it usually loses to renting over short stays and wins over longer ones. The crossover point — the break-even horizon — commonly falls somewhere between three and seven years, depending on prices, rates, and rent levels in your market.
Tip: The shorter your expected stay, the stronger the case for renting. Transaction costs of buying and selling are large, so a quick move can wipe out years of equity gains.
Frequently Asked Questions
Is it cheaper to rent or buy?
It depends on how long you stay, local prices and rents, and mortgage rates. Buying front-loads large costs, so renting is often cheaper over short periods while buying tends to win over longer horizons as you build equity.
What is the break-even point for buying?
The break-even horizon is the number of years you must own before buying becomes cheaper than renting. It commonly falls between three and seven years, but varies widely by market and interest rate.
What costs does buying include beyond the mortgage?
Buying adds closing costs of roughly 2% to 5% upfront, plus ongoing property taxes, homeowners insurance, and maintenance that often total around 2% to 3% of the home's value each year. Selling later costs about 5% to 6% in fees.
Does this account for investing my down payment?
Yes. The rent scenario assumes you invest your would-be down payment and closing costs and earn a 6% annual return, capturing the opportunity cost of tying that money up in a home.
What assumptions does this calculator make?
It assumes 3% annual home appreciation, 3% annual rent increases, about 2.6% of home value per year in taxes, insurance, and maintenance, 3% closing costs to buy, 6% selling costs, and a 6% return on invested savings. Adjust your expectations to your local market.