Rent vs Buy Calculator

It depends on your specific situation. With mortgage rates around 6-7%, monthly buying costs remain elevated compared to historical norms. However, if you plan to stay 5+ years, have stable income, and can afford the payments comfortably, buying may still make sense for building long-term equity. Use this calculator with your local numbers to compare the true costs over your expected timeframe.

The 5-year rule suggests you should plan to stay in a home for at least 5 years before buying makes financial sense. This timeframe allows you to recover the substantial transaction costs of buying (2-5%) and selling (5-8%) through equity building and potential appreciation. Moving sooner often means losing money compared to renting, even if your home's value increases.

This is the "opportunity cost" of buying. If you rent and invest the down payment plus monthly savings, you might build more wealth than through home equity. Our calculator compares both scenarios using your expected investment return rate. Historically, the S&P 500 has averaged 7-10% annually, though past performance doesn't guarantee future returns.

Beyond your down payment (3-20% of home price), you should have funds for closing costs (2-5%), moving expenses ($1,000-5,000), immediate repairs or furnishings, and an emergency fund covering 3-6 months of housing payments. The CFPB recommends having at least 3 months of mortgage payments in reserve after closing.

20% down avoids PMI (Private Mortgage Insurance), which adds 0.5-1% to your annual costs. However, putting down less keeps more money available for investments, emergencies, or other goals. Try both scenarios in the calculator to see the impact on your specific situation. Sometimes a smaller down payment with PMI is strategically better.

Historical averages are 3-4% for both home appreciation and rent increases nationally. However, this varies significantly by location. Research your specific market using resources from Freddie Mac or local real estate data. Consider running the calculator with conservative (2%), moderate (3-4%), and optimistic (5%+) scenarios to see how sensitive your results are to these assumptions.

Higher rates increase monthly payments but may cool home prices and reduce buyer competition. The decision depends on your finances, local market, and timeline. If you can afford the payments and plan to stay long-term, you can always refinance if rates drop. Remember: you can refinance your rate, but you can't renegotiate your purchase price.