Compare the true cost of renting versus buying over time
Over 7 years...
Renting wins by $45,563
That's $542/month in your favor
Renting
Buying
S&P 500 historical avg: ~10%. Conservative estimate: 7%.
Renting: Total Cost
Buying: Total Cost
The 5-7 Year Sweet Spot
5-7 years is often the tipping point. You've had enough time for appreciation to cover transaction costs, but the opportunity cost of the down payment is still significant. The winner depends heavily on local appreciation rates.
Assumptions
Buying wins later than most people expect once closing costs and the opportunity cost of the down payment are counted. Today’s rates →
Altgage Inc. NMLS #2447252 | 100 Cambridge St, Floor 14, Boston, MA 02114The "renting is throwing money away" line ignores what buying actually costs. Beyond the mortgage you have taxes, insurance, maintenance (~1% of home value annually), HOA, transaction costs (5–6% to sell), and the opportunity cost on your down payment. The honest answer to rent-vs-buy depends almost entirely on how long you'll stay.
Closing costs plus the real-estate commission to sell typically total 8–10% of the home's value. To break even on those one-time costs through equity build, you usually need 5+ years of ownership at average appreciation. Under 3 years and buying almost always loses, even in hot markets.
A $100,000 down payment sitting in home equity isn't earning the 7%+ return it would in an index fund. That opportunity cost — often $7,000–$10,000 per year — has to be subtracted from your "savings vs renting" math. This calculator includes it; many don't.
Local appreciation rates (national averages mislead — Phoenix and Detroit aren't on the same trajectory), future property tax reassessments, and whether you'll actually stay long enough. If you're 60%+ sure you'll stay 7+ years, model it. If you're job-hopping or unsure, the math almost always says rent.
Rent caps that are below market. Dual-income households where one income is uncertain. Anyone with debt costing more than the mortgage rate. Anyone who doesn't want to be a maintenance/landlord/HOA-meeting person. Buying isn't a financial decision in isolation — it's a lifestyle commitment too.
Most rent-versus-buy calculators compare a mortgage payment to a rent payment and stop. That comparison always favors renting early and always favors buying eventually, and it tells you nothing about your actual situation.
This one includes four things the simple version leaves out.
Opportunity cost on the down payment. $100,000 sitting in home equity isn’t earning what it would in the market. Over a decade that gap is frequently the single largest number in the comparison, and it’s the one most calculators omit entirely.
The full cost of exit. Not just the mortgage, but the commission and closing costs to sell — which is why short holds lose. And since the 2024 NAR settlement changed how buyer-agent compensation is negotiated, the cost of your next purchase is less predictable than it used to be. Model a range rather than a single figure.
Maintenance as a real line. Roughly 1% of home value a year, which most people mentally set to zero until the water heater goes.
The tax deduction at what it’s actually worth. Many homeowners take the standard deduction and get nothing from mortgage interest. A calculator that assumes you itemize overstates the case for buying, sometimes badly.
Change the time horizon above and watch the verdict move. That’s the whole answer: rent versus buy is a question about how long you’ll stay, and everything else is detail.
It depends almost entirely on how long you stay. Buying carries 8–10% of the home’s value in round-trip transaction costs, and it takes several years of principal paydown and appreciation to earn that back — so under three years renting almost always wins, and past seven buying usually does.
Five to seven years is the usual break-even range, though it moves with local appreciation, your rate, and what rents are doing in your market. The calculator above solves it for your numbers rather than the national average, which is the only version that matters.
No — renting buys housing and flexibility, the same way a mortgage payment’s interest portion buys the use of money. In the early years of a 30-year loan most of your payment is interest, taxes and insurance, none of which builds equity either. The honest comparison is total cost against total cost, including the return your down payment isn’t earning.
Uncertainty argues for renting. Buying is a bet that you’ll be in the home long enough to earn back the transaction costs, and the calculator above shows how expensive it is to be wrong — a three-year hold rarely recovers them even in a strong appreciation market.