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Compare the true long-term cost of renting versus buying a home, including equity and investment returns.
Net cost of buying = mortgage + taxes + insurance + maintenance - equity built up. Net cost of renting = rent paid - investment returns on down payment (opportunity cost).
Not always. Buying is generally better if you stay long-term (5+ years), in markets with moderate home prices, and when mortgage rates are favorable. Renting can be better in expensive cities, when you value flexibility, or when home prices are high relative to rent.
Divide home price by annual rent. Above 20 suggests renting may be favorable; below 15 suggests buying. In expensive cities like NYC or SF, ratios above 30 are common.
The money used for a down payment could instead be invested. If you put $80,000 down, you give up the investment returns that money could earn — this is the opportunity cost of buying.
Higher home appreciation favors buying, as the home gains value over time. However, appreciation is not guaranteed and varies widely by location and market conditions.
This calculator does not include closing costs (3-5% of price), HOA fees, renovation costs, or the tax deduction for mortgage interest. Closing costs significantly affect short-term break-even calculations.