Housing & credit
Rent or Buy a Home?
Compare equity, transaction costs, maintenance and taxes with rent and the value of keeping cash invested.
Compare complete housing costs
For buying, include the down payment, closing costs, principal and interest, property taxes, homeowners insurance, mortgage insurance, HOA dues, maintenance and selling costs. Principal builds equity, while interest and most operating costs are unrecoverable housing costs. The down payment and accumulated equity also have an opportunity cost because they could otherwise be used or invested.
For renting, include rent, renter's insurance, fees and expected increases. Model what happens to cash that is not used for a down payment or higher monthly owner costs.
The holding period can dominate the answer
Buying and selling involve substantial transaction costs. A short stay gives those costs less time to be offset by principal reduction or appreciation. There is no universal five- or seven-year rule, so compare several holding periods using local quotes rather than relying on a single break-even point.
Home appreciation and investment returns are uncertain. Use ranges and keep them independent. A model should not assume that the home and portfolio both receive optimistic returns without showing the risk.
Use costs from your local market
Property taxes, insurance, transfer taxes, HOA costs and maintenance vary by property and location. Use real quotes or manual estimates. An unknown local cost should remain incomplete, not silently become zero.
The calculator cannot measure every lifestyle factor. Stability, flexibility, schools, repair responsibility and the freedom to move can matter more than a small dollar difference. A renting scenario also assumes that any modeled cash-flow advantage is actually saved or invested; if it is spent instead, the projected investment balance will not appear.
Bottom line
A fair comparison uses real local costs, a realistic number of years in the home and the growth of any cash a renter can keep invested.
Related calculators
Sources
- CFPB: Financial Considerations of Buying a Home (opens in a new tab)
- CFPB: Ready to Buy a Home? (opens in a new tab)
This guide is for general education, not personal investment, tax, legal or financial advice. Check current rules and talk with a qualified professional when the decision calls for it.