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Should I rent or buy a home?

Compare the long-term financial impact of renting vs buying based on your local market and personal situation.

By ShouldICalc Team

Updated January 2025 · See our methodology

Your Numbers

$400,000
$150,000 $1,000,000
20%
3% 30%
7%
5% 9%
$2,000
$1,000 $5,000
7
2 15

Longer stays favor buying

1.2%
0.3% 3%
3%
0% 6%

Your Results

Annual Savings

$0 – $0

per year

5-Year Savings

$0 – $0

Break Even

— months

💡 Calculating...

Enter your numbers above to see personalized results.

Trade-offs to Consider

Every decision has pros and cons. Here's what to weigh:

  • Money

    Buying builds equity but ties up capital. Renting frees money for investments.

  • Time

    Homeownership requires maintenance time. Renting means landlord handles repairs.

  • Quality

    Own your space, customize freely. But responsible for all repairs.

  • Convenience

    Renting offers flexibility to move. Buying provides stability.

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Frequently Asked Questions

How long do I need to stay for buying to make sense?
The breakeven is typically 4-7 years in most markets. Selling costs (6%) and early mortgage years being interest-heavy mean short stays favor renting. The longer you stay, the more buying makes sense.
What if I can't afford 20% down?
You can buy with as little as 3% down (conventional) or 0% down (VA loans). But lower down payments mean higher monthly costs and PMI (private mortgage insurance). Run the numbers both ways.
Should I factor in investment returns on the down payment?
Yes. Our calculator includes opportunity cost - what you could earn if you invested the down payment instead. This is why renting can sometimes come out ahead even with lower monthly costs on buying.
What costs does this calculator include?
Mortgage P&I, property taxes, insurance, maintenance, buying closing costs, selling costs (realtor fees), appreciation, and opportunity cost of down payment. It's a comprehensive comparison.

Understanding the True Costs

Monthly Ownership Costs

Buying isn’t just the mortgage. Full monthly costs include:

  • Principal & Interest - Your loan payment
  • Property taxes - 0.5-3% of home value annually
  • Insurance - 0.3-0.5% of home value
  • Maintenance - 1-2% of home value for repairs
  • HOA fees - If applicable

Transaction Costs

  • Buying: 2-5% closing costs (lender fees, title, etc.)
  • Selling: 5-6% realtor commissions + closing costs
  • These costs make short-term ownership expensive

The Opportunity Cost

Your down payment could be invested instead. At 7% returns:

  • $80,000 down payment → ~$30,000 in gains over 5 years
  • This is money you’d have if renting instead

When Buying Makes Sense

  • Staying 5+ years - Time to overcome transaction costs
  • Rent-to-price ratio over 20 - High rents relative to home prices
  • Stable income and job - Can commit to payments
  • Want to build equity - Forced savings through mortgage
  • Plan to stay in the area - Roots in the community

When Renting Makes Sense

  • Staying less than 3-4 years - Transaction costs hurt short stays
  • Uncertain job or income - Flexibility is valuable
  • Hot housing market - High prices may not be sustainable
  • Want to invest elsewhere - Stock returns may beat appreciation
  • Don’t want maintenance burden - Landlord handles repairs

The 5% Rule (Quick Check)

Multiply home price by 5% for annual cost of ownership (mortgage interest + property taxes + maintenance). Divide by 12 for monthly cost.

If this is less than rent, buying may make sense. If this is more than rent, renting may be better.

Example: $400,000 home × 5% = $20,000/year = $1,667/month If rent is $2,000, buying might be better. If rent is $1,400, renting might be better.