Rent vs. Buy Home Comparison Calculator
Compare the true net financial cost of renting versus buying a home over 5, 10, or 30 years, factoring in property appreciation, mortgage interest, property taxes, maintenance, and investing down payment equity.
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Frequently Asked Questions
What is the 5% rule when comparing renting versus buying?
The 5% rule estimates unrecoverable costs of homeownership: 1% property tax, 1% home maintenance, and ~3% cost of capital (mortgage interest or down payment opportunity cost). If equivalent annual rent is less than 5% of home value, renting is generally financially competitive.
How long do you need to live in a house for buying to beat renting?
In most US metropolitan areas, the typical break-even timeline is between 4 and 7 years. Selling before 4-5 years usually results in a net financial loss due to 6% realtor sales commissions, 3% closing costs, and mortgage interest weighting in early amortization years.
What hidden homeowner expenses must be accounted for?
Beyond principal and interest, homeowners must pay property taxes (average 1.1% in the US), homeowners hazard insurance ($1,500 - $3,000/yr), private mortgage insurance (PMI if down payment is under 20%), HOA fees, and recurring maintenance/repairs (1% to 2% of home value annually).
Why does the renter's down payment investment return matter?
A homebuyer locks up $84,000 on a 20% down payment on a $420,000 home. A renter can invest that identical $84,000 into a low-cost S&P 500 index fund yielding historical 7% to 10% returns, compounding significantly over 5 to 10 years.