Rent vs Buy a Home: True Monthly Cost Comparison
Renting trades **flexibility** for **no equity build**. Buying adds **PITI**, maintenance, closing costs, and **opportunity cost** on your down payment—but you capture appreciation and principal paydown. The breakeven horizon often sits between **3–7 years** depending on market and rent growth.
Step by step
1. Compare monthly cash flow
Rent payment vs PITI + HOA + maintenance (often 1–2% of home value per year). Use realistic insurance and tax estimates.
2. Add one-time buy costs
Closing costs, moving, initial repairs. Amortize over your expected stay if comparing to multi-year rent.
3. Model opportunity cost
Down payment could earn elsewhere. Buying wins more when appreciation + principal exceeds rent inflation and foregone returns.
Rent vs buy
Short stays favor rent; long stays with stable income often favor buy in balanced markets.
- Rent: Lower upfront cash; predictable monthly; no maintenance equity.
- Buy: Equity build; tax benefits (jurisdiction-dependent); illiquid; transaction costs.
- Mobility: Rent wins if you may relocate within 2–3 years.
- Rate environment: High mortgage rates raise buy cost; rent may lag until leases reset.
Use our calculators
Common mistakes
- Ignoring maintenance and insurance
- Comparing rent to P&I only, not full PITI
FAQ
Is buying always better than renting?
No—high prices, short tenure, or weak job mobility can favor rent.
What is the 5% rule?
A quick heuristic: compare annual rent to ~5% of home price (cost of ownership proxy)—not a full model.