Rent vs Buy Comparison
Compare renting versus buying a home side-by-side. See monthly costs, long-term wealth building, and which option fits your situation best.
Renting
Buying
Renting Wins!
After 10 years with a $29,013 advantage in net worth
🏢 Renting
- +Lower upfront costs (security deposit vs down payment)
- +No maintenance or repair responsibilities
- +Flexibility to move easily
- +No property tax or HOA fees directly
- +Can invest down payment money instead
- -No equity building
- -Rent increases over time
- -Limited control over the property
- -No tax benefits from mortgage interest
- -Landlord can sell or not renew lease
🏡 Buying
- +Build equity with each payment
- +Fixed mortgage payment (with fixed-rate loan)
- +Potential home value appreciation
- +Tax deductions (mortgage interest, property tax)
- +Freedom to modify and improve your home
- -Large upfront costs (down payment, closing costs)
- -Responsible for all maintenance and repairs
- -Less flexibility to relocate quickly
- -Property value can decrease
- -Additional costs: taxes, insurance, HOA, maintenance
The age-old question of whether to rent or buy a home is one of the biggest financial decisions you'll ever make. This side-by-side comparison tool helps you see the real differences between renting and buying based on your specific situation. Unlike simple "rule of thumb" calculators, this interactive comparison accounts for opportunity cost, home appreciation, rent increases, and investment returns to give you a complete picture over your time horizon.
🫙 Jar Insight: The Rule of 150
There's a quick way to compare rent vs buy: the Rule of 150.
Multiply your monthly rent by 150 to find the equivalent home price. If rent is $2,000/month, a comparable buy would be a $300,000 home.
Why 150? This rough rule accounts for property taxes, maintenance, insurance, and opportunity cost of the down payment. It's not perfect, but it's a fast sanity check.
The math behind it:
- Home price of $300,000 with 20% down = $240,000 loan
- At 7% over 30 years = ~$1,600/month mortgage P&I
- Add ~$400/month for taxes, insurance, maintenance
- Total: ~$2,000/month (matching the $2,000 rent)
When the rule breaks down:
- Very high/low property tax areas
- Condos with expensive HOA fees
- Markets with unusual appreciation rates
- When you plan to stay <5 years or >20 years
This comparison tool does the full calculation, so you don't have to rely on the rough rule.
The True Cost of Homeownership
Many first-time buyers only look at the mortgage payment, but ownership costs go far beyond:
Monthly Ownership Costs:
| Cost | Typical Range | Notes |
|---|---|---|
| Mortgage P&I | 60-70% of total | Principal + interest payment |
| Property Taxes | 10-20% | Varies wildly by location (0.3%-2.5%) |
| Homeowner's Insurance | 5-8% | Required by lender |
| Maintenance | 8-12% | Budget 1-2% of home value annually |
| HOA Fees | 0-15% | Common in condos/planned communities |
| PMI | 0-8% | If down payment <20% |
Example: $400,000 Home
- Mortgage (7%, 30yr, 20% down): $2,131/month
- Property Tax (1.2%): $400/month
- Insurance: $150/month
- Maintenance (1%): $333/month
- Total: $3,014/month
Compare this to renting the equivalent home for $2,000-2,200/month—the gap is larger than most expect!
Hidden costs buyers forget:
- Closing costs (2-5% of purchase)
- Moving expenses
- Immediate repairs/updates
- Lawn care/snow removal
- Appliance replacements
- Selling costs when you move (6-10%)
The Investment Opportunity Cost
When you buy a home, you tie up a significant amount of capital in a single asset. The alternative? Invest that money and potentially earn returns.
The Down Payment Investment Question:
| Home Price | 20% Down | Invested at 7% for 10 Years |
|---|---|---|
| $300,000 | $60,000 | $118,000 |
| $400,000 | $80,000 | $157,000 |
| $500,000 | $100,000 | $197,000 |
But wait—doesn't the home appreciate too?
Yes! That's why this comparison matters. A home appreciating at 3% is competing against investments earning 7%.
The leverage advantage: With 20% down, you control 100% of the home's appreciation. A 3% gain on a $400,000 home is $12,000—a 15% return on your $80,000 down payment.
The catch: You can't easily access that equity without selling or borrowing against it.
What renters can invest:
- The down payment itself
- Monthly savings (rent is often cheaper than total buy costs)
- Money not spent on maintenance
- Flexibility to invest in higher-returning assets
The verdict: Neither option is universally better. It depends on your local market, how long you'll stay, and your investment discipline.
When Renting Makes More Sense
Despite the cultural pressure to own, renting is often the smarter financial choice:
Rent if you:
-
Plan to stay less than 5 years
- Closing costs (buy + sell) can total 8-15% of home value
- You need time to recoup these costs through appreciation
-
Value flexibility
- Job opportunities in other cities
- Life changes (marriage, kids, divorce) that affect housing needs
- Uncertain about the area
-
Live in an expensive market
- In cities like NYC, SF, or Seattle, the rent-to-price ratio is extremely tilted
- Renting can save hundreds of thousands over 10 years
-
Can invest the difference
- If you'll actually invest the savings, not spend them
- Stock market historically returns 7-10% annually
-
Don't want responsibility
- No maintenance headaches
- No property tax bills
- No HOA drama
The rent trap myth: "Renting is throwing money away" is one of the most misleading financial sayings. You're paying for housing—that's not waste. You'd also "throw away" money on mortgage interest, taxes, insurance, and maintenance as an owner.
When Buying Makes More Sense
Home ownership can be a powerful wealth-building tool under the right conditions:
Buy if you:
-
Plan to stay 7+ years
- More time to recoup transaction costs
- More time for appreciation to compound
- Builds significant equity through mortgage paydown
-
Live in a market with reasonable prices
- The rent-to-price ratio matters enormously
- If similar rent and mortgage payments, buying usually wins long-term
-
Value stability
- Fixed mortgage payment (with fixed-rate loan)
- No landlord deciding to sell
- No rent increases
-
Want to build forced savings
- Every mortgage payment increases your equity
- Many people struggle to invest consistently—forced equity builds wealth
-
Can afford it comfortably
- Not stretching to maximum approval
- Emergency fund intact after down payment
- Room in budget for maintenance surprises
The wealth-building advantage: The median homeowner's net worth is 44 times higher than the median renter's ($255,000 vs $6,300). While this is partly selection bias (higher earners buy homes), forced equity building is a significant factor.
The 5-Year Rule
A commonly cited guideline is the "5-year rule": don't buy unless you'll stay at least 5 years. Here's why:
Year-by-Year Breakdown (Example):
Assumptions: $400,000 home, 20% down, 7% rate, 3% appreciation
| Year | Home Value | Equity | Selling Costs (8%) | Net After Sale |
|---|---|---|---|---|
| 1 | $412,000 | $91,000 | $33,000 | $58,000 |
| 2 | $424,000 | $102,000 | $34,000 | $68,000 |
| 3 | $437,000 | $114,000 | $35,000 | $79,000 |
| 5 | $464,000 | $139,000 | $37,000 | $102,000 |
| 7 | $492,000 | $167,000 | $39,000 | $128,000 |
| 10 | $537,000 | $213,000 | $43,000 | $170,000 |
Started with $80,000 down payment.
- Year 1-3: You might actually LOSE money selling (down payment + closing costs > net proceeds)
- Year 5: You're roughly break-even with investing the down payment
- Year 7+: Buying starts to pull ahead
Market matters: In a hot market with 5-6% appreciation, buying wins faster. In a flat market, renting wins longer.
The takeaway: If you might move in less than 5 years, seriously consider renting.
Frequently Asked Questions
No—this is a myth. Renters pay for housing; owners pay for housing PLUS interest, taxes, insurance, maintenance, and transaction costs. The difference is equity building, but that only matters if you stay long enough. A renter who invests the down payment and monthly savings can often come out ahead financially, especially over shorter time horizons.
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