Why the timeline dominates everything
Buying front-loads enormous costs: a down payment that stops earning elsewhere, ~3% in closing costs on the way in, and ~7% in agent commissions and fees on the way out. Equity and appreciation repay those costs — but slowly, because early mortgage payments are mostly interest (see how amortization works). That's why almost every honest model produces a crossover year rather than a universal winner. Before the crossover, renting is genuinely cheaper — not "throwing money away." After it, ownership compounds in your favor. If you're confident you'll stay 10+ years and the payment fits (check the affordability calculator), buying usually wins; if a move within ~5 years is plausible, renting usually does.
Frequently asked questions
Is it cheaper to rent or buy?
It depends almost entirely on how long you stay. Buying carries heavy one-time costs (down payment, ~3% buying costs, ~7% selling costs) that need years of equity and appreciation to earn back. With typical inputs the crossover lands around years 4–7; short stays favor renting, long stays favor buying. The calculator computes your crossover year from your actual numbers.
What does the "net cost of owning" include?
Everything out of pocket — down payment, buying costs, mortgage payments, property tax, insurance, and maintenance — MINUS the equity you would walk away with if you sold that year (value grown by your appreciation assumption, less ~7% selling costs and the loan balance). That makes it directly comparable to cumulative rent.
What is the 5% rule for renting vs buying?
A popular shortcut: multiply the home price by 5% and divide by 12 — if rent is below that, renting is arguably cheaper once maintenance, taxes, and cost of capital are counted. It’s a decent sanity check but ignores your timeline, which dominates the real answer; use the year-by-year table instead.
What appreciation rate should I assume?
Long-run US home appreciation has averaged roughly 3–4% per year nominal, with huge local and decade-to-decade variation. Test 0% and 5% to see how sensitive your answer is — if the verdict flips easily, the honest conclusion is "close call," and non-financial factors should decide.
Does this include the tax deduction for mortgage interest?
No — since the standard deduction doubled, most homeowners no longer itemize, so we default to no deduction rather than overstating buying. If you do itemize, the effect improves buying modestly.
What about investing the down payment instead?
A renter who invests the would-be down payment can offset part of buying’s equity advantage. We keep that out of the base model for transparency (assumption-heavy); if you want it, mentally credit renting with your expected after-tax return on the down payment.
Related calculators
- Home Affordability Calculator — How much house can you afford? Income, debts, and the 28/36 rule turned into a real price range.
- Mortgage Calculator — Estimate your full monthly payment — principal, interest, property taxes, insurance, PMI, and HOA — with a complete amortization schedule.
- Down Payment Calculator — Every tier from 3.5% to 20% compared: cash needed, payment, PMI — and what your savings cover.
- 15-Year Mortgage Calculator — 15 vs. 30 years side by side: payment difference, interest difference, and equity build.
Disclaimer: Educational purposes only — not financial advice. Long-horizon assumptions (appreciation, rent growth) drive the result; stress-test them. See our Terms of Use.