Renting vs. buying is more than a monthly payment comparison
It's tempting to compare renting and buying by simply looking at monthly rent versus a monthly mortgage payment — but that misses two of the biggest factors: the equity you build by paying down a mortgage and potential home appreciation, and the opportunity cost of tying up your down payment in a home instead of investing it. This calculator models both sides over your chosen time horizon.
A worked example
Compare $2,200/month rent against buying a $380,000 home with 10% down ($38,000) at 6.75%. Over 7 years, the renter's $38,000 grows at an assumed 6% investment return while rent (assumed to rise 3%/year) totals roughly $200,000 in cumulative payments. The buyer pays mortgage principal & interest, taxes, insurance, and 1% annual maintenance, but builds equity through both principal paydown and 3% annual appreciation, then nets out an estimated 7% selling cost when the horizon ends. Depending on exactly how those appreciation and return assumptions play out, either side can come out ahead by a meaningful margin — which is exactly why it's worth running your own numbers rather than relying on a rule of thumb.
Factors that tip the decision
- How long you'll stay: Buying tends to look better the longer you stay, since upfront costs get spread over more years.
- Local rent vs. home prices: Markets with high rent relative to home prices tend to favor buying, and vice versa.
- Investment returns: If you expect strong returns elsewhere, the opportunity cost of a down payment weighs more heavily toward renting.
- Home appreciation: Faster local appreciation tips the math toward buying.
Ready to see what you could actually afford to buy? Start with the Home Affordability Calculator.