Rent
Total net cost over 7 years
—
Total rent paid—
Insurance paid—
Deposit (returned)—
Down pmt invested → grows to—
Buy
Total net cost over 7 years
—
Mortgage payments—
Property tax + insurance + maint—
Closing + selling costs—
Home value at sale—
Equity (mortgage principal paid)—
Net cost over time — rent vs buy
When the buy line crosses rent, buying has become the better financial decision.
Frequently asked questions
Why does time horizon matter so much?
Buying a home involves large one-time transaction costs — closing costs when buying (2–4%) and agent commissions when selling (5–6%). These are sunk costs you need time to offset with appreciation and equity. In most US markets, you need to stay 5–7 years before buying makes clear financial sense. Short-term, renting almost always wins.
What is "opportunity cost" in this context?
When you buy, you tie up your down payment in home equity instead of investing it. A $100,000 down payment invested in a diversified index fund at 7% annual return becomes $196,715 after 10 years. That foregone growth is the opportunity cost of homeownership. This calculator accounts for this by crediting renters with the investment growth of the saved down payment.
Is the mortgage interest tax deduction factored in?
This calculator uses pre-tax numbers. The mortgage interest deduction only benefits homeowners who itemize, and with the 2017 standard deduction increase ($29,200 for married filers in 2024), fewer than 15% of households itemize today. If you do itemize, your actual after-tax buy cost is lower than shown here.
What maintenance cost should I use?
The 1% rule is a starting estimate: budget 1% of home value annually for maintenance and repairs. On a $520,000 home that's $5,200/year. Older homes or those in harsh climates often run 1.5–2%. This covers routine repairs but not major capital expenditures (roof: $15–25k, HVAC: $8–15k, kitchen remodel: $30–80k) which you should budget separately.
Is buying always better long-term?
Not necessarily — it depends heavily on local price-to-rent ratios, appreciation rates, and what you'd do with the difference. In high price-to-rent markets (San Francisco, NYC), renting and investing the savings can outperform buying even over 10–15 years. In lower-cost markets with strong appreciation, buying typically wins past year 5–7.
Rent vs Buy in 2025 — The Real Financial Comparison
At 7% mortgage rates, buying has become significantly more expensive vs renting in most US markets. But the rent vs buy decision is never purely about monthly payments — it's about total wealth accumulation over your planned time horizon, including equity growth, investment opportunity cost, and transaction costs.
Price-to-Rent Ratio by City (2025)
The price-to-rent ratio divides median home price by annual rent. A ratio below 15 favors buying; above 20 favors renting; above 25 means renting is strongly preferred mathematically.
| City | Median Home | Median Rent/yr | P/R Ratio | Verdict |
|---|
| Detroit, MI | $85,000 | $12,000 | 7 | Strong buy |
| Cleveland, OH | $165,000 | $13,200 | 12 | Buy |
| Atlanta, GA | $380,000 | $22,800 | 17 | Neutral |
| Austin, TX | $490,000 | $24,000 | 20 | Lean rent |
| Los Angeles, CA | $860,000 | $28,800 | 30 | Rent |
| San Francisco, CA | $1,200,000 | $36,000 | 33 | Strongly rent |
The Break-Even Timeline
Buying always wins eventually — because you're building equity and your "payment" stays fixed while rents rise. The question is how many years it takes to break even on the transaction costs. In most US markets at current rates:
• Low-cost Midwest markets (P/R under 12): Break-even in 2–4 years
• Average-cost markets (P/R 15–20): Break-even in 5–8 years
• High-cost coastal markets (P/R 25+): Break-even in 10–15+ years, if ever
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