Rent versus buy
Does buying beat renting for you yet?
Renting and owning are not the same product, so setting rent against a mortgage payment misses most of the picture. This puts the carrying costs on both sides. The answer still turns on assumptions nobody can know in advance, so every one of them is yours to change.
Renting
$
%
$
Per month.Buying
$
$
%
An editable illustration, not a rate anyone has offered you.yrs
$
$
$
Zero for most single-family homes. Condos and many townhomes have them.% / yr
Percent of the loan per year. Leave at zero if you are not sure.Assumptions
%
This one assumption moves the answer more than any other. Try it at zero.%
Rent rises in this model, so these have to as well. Holding them flat quietly favours buying.%
Percent of home value. An average, not a schedule.%
%
yrs
Up to 60. The comparison is most useful over the span you would actually own the home.Estimate
On the numbers and assumptions you set:
Buying comes out $31,829 ahead over 7 years
- Net cost of buying
- $199,884
- Net cost of renting
- $231,713
- Monthly cost of owning, year one
- $3,495 / mo
- Of which maintenance
- $417 / mo
- Equity you would walk away with
- $216,376
- Break-even
- Year 5
What this assumed
- Home value rising 3% a year and rent rising 3% a year. Both are guesses. Set appreciation to zero and see what happens.
- A 6.5% rate over a 30-year loan, held 7 years.
- Maintenance at 1% of home value a year, 3% to buy and 6% to sell.
- Property taxes, homeowners insurance and HOA dues rising 3% a year, the same way rent does.
- Selling costs come out of the equity figure, so it is what you would actually walk away with rather than what the home is worth.
What it leaves out
- Any return your down payment and closing costs might have earned if you rented and invested them instead. On a long horizon this is often the single biggest missing piece.
- Any tax treatment, including mortgage interest and property tax deductions and the capital gains exclusion on a primary home.
- Maintenance is an even yearly percentage here. Real repairs arrive in lumps, and a roof or an HVAC system in one bad year does not look like an average.
- Special assessments, rent concessions, moving costs, and anything specific to one building or one landlord.
- Mortgage insurance, if you enter any, is charged here for every month there is a loan balance. On a real loan it can end earlier than that, and when it ends depends on the loan you have. Ask about yours rather than reading it off this page.
This is an educational estimate, not a rate quote or a commitment to lend. The answer it gives depends almost entirely on assumptions nobody can know in advance, which is why they are all editable and listed above rather than hidden. Change the ones you disagree with and see whether the answer holds.