Is it better
to rent or buy?

Field guide

What “break-even” actually means.

The naive comparison is to add up rent payments versus mortgage payments and call it a day. That answer is wrong on both sides. Renters don't just pay rent; they also keep their down payment liquid, which would have grown if invested. Owners don't just pay a mortgage; they also pay property tax, insurance, maintenance, closing costs, and selling costs that never appear on the loan statement.

This calculator handles all of that. Both households start with the same liquid capital. The renter invests it; the buyer puts it into the home. Each month, whichever scenario costs less in cash gets to invest the difference at the same return rate. We track each household's net wealth: the renter's portfolio versus the owner's home equity (after a realistic 6% selling cost) plus any portfolio they accumulated. The break-even year is the first year in which the owner's wealth catches up to and passes the renter's.

Hidden costs of homeownership

The mortgage is the visible cost. The hidden costs are the ones that quietly eat 4-5% of your home's value every year and they don't show up on the loan disclosures. Most first-time buyers are surprised by how much of the “owning is cheaper than renting” argument disappears once these are honestly accounted for.

1. Closing costs (paid upfront)

Lender origination fees, title insurance, appraisal, inspection, attorney fees, recording fees, prepaid interest, escrow funding. Typically 2–5% of the home price, due at closing on top of the down payment. On a $400,000 home that's $8,000–$20,000 of cash that's just gone, never recovered, never invested.

2. Property tax

Charged annually by your county and based on assessed value. The US national median is around 1.1% of home value per year, but it ranges from ~0.3% (Hawaii, Alabama) to over 2% (New Jersey, Illinois, Texas). Property tax usually scales with home value as your home appreciates, a feature, not a bug.

3. Homeowners insurance

Roughly 0.3–0.5% of home value per year, higher in fire, flood, or hurricane zones. Required by every mortgage lender. If you live in a high-risk area (coastal Florida, wildfire zones in California), this can climb above 1% and in some markets insurance is becoming difficult to buy at any price.

4. Maintenance & repairs

The single most-underestimated category. Industry rule of thumb is 1% of home value per year averaged over a long horizon. In some years it's zero; in others it's a $20,000 roof replacement and a $9,000 HVAC system in the same calendar year. Older homes and homes in harsh climates run higher than 1%; newer construction in mild climates runs lower, but never zero.

5. HOA / condo fees

If you buy a condo, townhouse, or in a planned community, the HOA collects monthly dues for shared maintenance, amenities, and reserves. $200 to $1,500/month is a typical range; high-rise condos in major cities can easily exceed $2,000/month. Not included in the default assumptions above; add it manually to maintenance if relevant.

6. PMI (private mortgage insurance)

If your down payment is less than 20%, your lender will require PMI, typically 0.3–1.5% of the loan amount per year until you reach 20% equity. PMI protects the lender, not you. It's pure overhead.

7. Selling costs

When you eventually sell, expect to lose roughly 6–8% of the sale price to realtor commissions, transfer taxes, title fees, and concessions to the buyer. On a $500,000 home that's $30,000–$40,000 you'll never see again. This calculator subtracts 6% from your home value when computing equity, so the wealth comparison is fair.

8. Opportunity cost of the down payment

The biggest hidden cost and the one that flips the argument for many buyers. Twenty percent down on a $400,000 home is $80,000 of cash. If that $80,000 had been invested in an S&P 500 index fund instead, at a long-run ~10% nominal return it would grow to roughly $1.4M over 30 years. Buying a home isn't free; you give up whatever else that capital could have earned.

9. Property improvements

Most owners spend money making the home theirs. Furniture, appliances, paint, landscaping, the kitchen renovation in year 7. None of these are required , but most owners do them anyway, and very little of that spending comes back at sale time. Renters typically spend less on this category because there's no psychological return on improving someone else's asset.

10. Lost flexibility

Not a dollar cost, but worth naming. Selling a home takes 30–90 days, costs 6–8%, and is hard to do quickly in a soft market. Renters can leave with 30 days' notice for a relocation, a job change, a relationship shift. That optionality is genuinely valuable, especially in your 20s and 30s when life moves fast.

When buying tends to win

• Long horizon. The longer you stay, the more closing and selling costs amortize over time and the more compounding home appreciation matters. Most fair models put break-even somewhere between year 5 and year 10; below that, transaction costs alone usually crush the buyer.
• High rent growth. If your local rent market is appreciating faster than the national average (3%/yr default here), buying locks in your housing cost against that runaway curve.
• Stable life. Stable job, stable relationship, stable city. Selling early is what makes buying expensive.
• Low mortgage rate. When rates are low, the cost of carrying the mortgage falls; when rates are high (above ~7% as of 2024-2025), the math flips for many people.

When renting tends to win

• Short horizon. Anything under 3-5 years and the round-trip transaction costs almost guarantee you'd have done better renting.
• You'll actually invest the difference. The whole renting-wins argument depends on actually investing the down payment AND the monthly cash savings. If you'll spend it instead, the discipline of a mortgage forces savings the renter has to summon themselves.
• High investment return assumption. When you can earn 7-10% on equities and your home appreciates at 3%, renting and investing tends to win on raw wealth terms, though it forfeits the lifestyle benefits of ownership.
• Expensive markets. In cities where the price-to-rent ratio is above ~25 (San Francisco, NYC, Vancouver historically), the buyer is paying a steep premium for the privilege of ownership.

The non-financial side

None of this captures the things that aren't in dollars: the psychological security of owning, the freedom to renovate without a landlord's permission, the stability of school districts, the community ties that come with a long stay. Conversely: the freedom of not being responsible for a roof, the ability to relocate for opportunity, the bandwidth not spent thinking about HVAC. Run the numbers. Then make the call that fits the life you actually want to live.