Whether buying beats renting depends mostly on how long you stay. Compare the two over your own time frame.
How it works
Net cost of buying = everything paid to own − what you keep when you sell
Owning adds the down payment, closing costs, principal and interest, taxes, insurance, dues and upkeep over the years you stay, then subtracts the sale price after selling costs and the remaining loan balance. Renting adds the rent, rising each year, less what the down payment and closing costs would have earned if invested.
Keep in mind
- Home values and investment returns can fall as well as rise; try a few assumptions.
- Tax effects, such as the mortgage interest deduction or tax on investment gains, are not included.
Questions
Is it better to rent or buy?
Over a short stay, renting usually costs less because buying and selling costs need time to recover. Over a longer stay, building equity usually tips it toward buying. This calculator shows where the line falls for your numbers. See also: Bridge loan equity calculator.
How long do I need to stay for buying to make sense?
Often several years, depending on prices, rents and your rate. Enter your numbers and change the years to find your break-even.
Does this include the down payment?
Yes. The down payment is counted as a cost of buying and comes back through the equity when you sell; for renting, it is counted as savings that earn a return.
