Renting versus buying, properly counted
The "rent vs buy" question is rarely answered by comparing a monthly rent to a monthly mortgage payment. Renting's cost is simply the rent you pay. Owning's cost is the down payment, the mortgage, taxes, insurance and maintenance — minus the equity you still hold when you sell. The longer you stay, the more the mortgage principal you repay and the home appreciation you capture outweigh the upfront and transaction costs of buying.
The model behind this calculator
Rent cost = Σ rent × (1 + increase)year
Own net = down + Σ(P&I + tax + ins + maint) − (sale × (1 − cost%) − balance)
Rent rises each year by your assumed increase. The home value grows by appreciation, and taxes plus maintenance are charged on that growing value. At sale, proceeds equal the appreciated price less selling costs and the remaining loan balance.
Worked example
A $400,000 home with 20% down at 6.5% costs about $1,580/mo in principal and interest. Over 7 years at 3% appreciation it grows to ~$492,000. Total out-of-pocket (down, mortgage, tax, insurance, maintenance) is roughly $315,000, but you recover about $245,000 in sale proceeds — a net ownership cost near $70,000. Renting the same period at $2,200/mo rising 3%/yr costs about $200,000. Here renting is far cheaper short-term; owning only pulls ahead once appreciation and years in the home compound.
Why the time horizon dominates
Buying loads cost into the first years through the down payment and selling fees. If you move after two years, those fixed costs rarely pay back. The classic break-even is around 5–7 years in stable markets, sooner when prices rise fast, later when they stall. Your personal stability is the single biggest variable.
5 tips before you decide
- Count selling costs. Budget 6–8% of the sale price; ignoring them overstates owning's benefit.
- Mind maintenance. Owners spend 1–2% of value yearly on upkeep that renters never see.
- Compare after-tax. Mortgage interest and property tax deductions can trim ownership cost for some filers.
- Stress-test appreciation. Run the calculator at 0% growth to see the worst case.
- Factor mobility. If a job move is likely, renting's flexibility has real financial value.
Related calculators
Size the mortgage with the Mortgage Calculator, plan the down payment with the Savings Calculator, and weigh refinancing later with the Refinance Calculator. See all Finance tools.