Rent vs Buy Calculator
Compare the true long-term cost of renting versus buying a home, including equity, appreciation, and opportunity cost.
Typical Break-Even Timeline by Market (2025)
| Market Type | Median Home Price | Break-Even (Est.) |
|---|---|---|
| Affordable Midwest/South | $220,000 | 2–4 years |
| National Median | $420,000 | 4–6 years |
| Major Metro (Chicago, Dallas) | $600,000 | 6–8 years |
| High-Cost (Boston, Seattle) | $900,000 | 8–12 years |
| Super-Premium (NYC, SF) | $1,500,000+ | 12–20+ years |
Estimates assume 20% down, 6.7% mortgage rate, 3% appreciation, and 3% annual rent increases. Actual break-even depends heavily on local market conditions.
Frequently Asked Questions
Is it better to rent or buy a home?
It depends on your timeline, local market, and finances. Buying builds equity and hedges against rent increases, but comes with high upfront costs (down payment, closing costs), maintenance expenses (~1–2% of home value per year), and illiquidity. Renting offers flexibility and lower upfront costs but no equity. Generally, if you plan to stay 5+ years and can afford 20% down, buying tends to win financially. In expensive markets like San Francisco or New York, the break-even point can be 10+ years.
What is the 5% rule for rent vs buy?
The 5% rule (popularized by Ben Felix) estimates the annual unrecoverable cost of owning a home as roughly 5% of the home's value: 1% property tax + 1% maintenance/insurance + 3% opportunity cost on equity. If your monthly rent is less than 5% ÷ 12 of the home's purchase price, renting may be financially advantageous. Example: $500,000 home × 5% / 12 = $2,083/month. If rent is under $2,083, renting likely wins.
How much down payment do I need to buy a home?
Conventional loans typically require 5–20% down. A 20% down payment eliminates Private Mortgage Insurance (PMI), which costs 0.5–1.5% of the loan amount annually. FHA loans allow as little as 3.5% down but require mortgage insurance for the life of the loan. VA loans (for veterans) and USDA loans (rural areas) allow 0% down. In 2025, the median home price in the US is approximately $420,000 — a 20% down payment would be $84,000.
What closing costs should I expect when buying?
Closing costs typically run 2–5% of the loan amount and include: loan origination fees (0.5–1%), appraisal ($300–$500), title insurance (~0.5%), attorney/escrow fees ($500–$1,500), recording fees, and prepaid items (first year homeowners insurance, property tax escrow). On a $400,000 home with 20% down, expect $6,400–$16,000 in closing costs. Some costs are negotiable or can be rolled into the loan.
How does home appreciation affect the rent vs buy decision?
Home appreciation is often cited as the main benefit of buying, but it must be compared against alternatives. From 1965–2024, US home prices appreciated ~4.5% annually, barely above inflation (~3.5%). After subtracting maintenance, taxes, and insurance, the real return on a home is typically 1–2% annually — lower than a diversified stock portfolio's historical ~10% return. However, leverage (mortgage) amplifies gains, and homeowners capture full appreciation on a partially-financed asset.