🏠Rent vs Buy Calculator
Should you rent or buy? Compare total costs, build equity, and see which option is best for your financial situation.
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Frequently Asked Questions
Is it better to rent or buy a home?
It depends on your situation. Buying is often better if you plan to stay 5+ years, have stable income, and can afford a down payment. Buying builds equity and offers tax benefits, but comes with maintenance costs and less flexibility. Renting is better for short-term stays, uncertain locations, or if you can't afford to buy. Consider the rent-to-price ratio: if annual rent is less than 5% of home price, buying may be better; if over 7%, renting may be smarter.
How long should I plan to stay to make buying worth it?
Generally, you should plan to stay at least 5-7 years to make buying worthwhile. It typically takes this long to recoup closing costs and build enough equity to offset selling costs. If you might move in 2-3 years, renting is usually better. The break-even point depends on your local market, home prices, and rent levels.
What hidden costs of homeownership should I consider?
Beyond mortgage payments, homeowners pay property taxes (1-2% of home value annually), homeowner's insurance ($1,000-3,000/year), HOA fees ($200-400/month in many communities), maintenance and repairs (1-2% of home value annually), and selling costs (6-10% when you sell). These can add $500-1,500+ to your monthly housing costs. Also budget for closing costs (2-5% of purchase price) upfront.
Should I invest instead of buying a home?
This depends on market conditions and personal goals. Historically, the stock market has returned about 10% annually vs. 3-4% for home appreciation. However, a home provides leverage (you control a $400K asset with an $80K down payment), forced savings, tax benefits, and a place to live. Many financial advisors recommend doing both: buy a modest home and invest in retirement accounts. Don't forget emotional factors like stability and pride of ownership.
What's a good rent-to-price ratio?
The rent-to-price ratio compares annual rent to home prices. Divide annual rent by home price: if the ratio is 5% or less, buying is often better; if 7% or more, renting may be smarter; 5-7% is a gray area. For example, if homes cost $400K and rent is $2,000/month ($24K/year), the ratio is 6% - borderline. This ratio varies by location: expensive cities like San Francisco (2-3%) favor renting, while affordable cities (7-8%) favor buying.
Financial Disclaimer
This calculator is provided for educational and informational purposes only. The results are estimates based on the information you provide and should not be considered as financial, legal, or tax advice.
Actual results may vary based on your specific circumstances, market conditions, and other factors. Always consult with qualified financial, legal, and tax professionals before making any financial decisions.
We make no guarantees about the accuracy, completeness, or reliability of the calculations. Use this tool at your own risk.