Renting vs. buying a home
Scenario. A $450,000 home with 20% down versus renting a comparable place for $2,200/month. Both paths deploy the same upfront cash; the renter invests it and the monthly difference. Use the calculator to set appreciation, rent inflation, and investment-return assumptions to your own view.
| Keep renting, invest the difference | Buy the home | |
|---|---|---|
| Upfront cash (down + closing) | Invested | $103,500 |
| Starting monthly housing cost | $2,200 | $2,337 P&I + taxes, insurance, upkeep |
| Cost that builds equity | None | Principal portion of each payment |
| Exposure to home prices | None | Full — gain or loss on sale |
| Typical break-even to buy | — | About 4–6 years |
Run “Keep renting, invest the difference” → · Run “Buy the home” →
Transaction costs set the floor
Buying costs roughly 2–5% of the price to get in and 6–8% to get out (agent commissions, transfer taxes, title). That 8–13% round trip is why buying and selling within a couple of years almost always loses to renting: appreciation has to overcome those costs before you are even. Over five to ten years, ongoing rent inflation and principal paydown usually tip it the other way.
What actually drives the answer
- How long you stay — the single biggest factor. Short stays favour renting; long stays favour buying.
- The rent-to-price ratio in your market — a $450,000 home renting for $1,800 is a very different calculation than one renting for $3,000.
- What the renter does with the difference — the comparison only holds if that money is genuinely invested, not spent.
- Appreciation and investment returns — both are assumptions, and small changes swing the result. Be honest, not optimistic, on both.
Frequently asked questions
How many years until buying beats renting?
Is renting throwing money away?
Does a bigger down payment change the rent-vs-buy answer?
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Terms: Home equity , Closing costs , Principal