Rent vs buy
For a $1,500,000 home (20% down, 6.5% mortgage) vs renting at $4,500/mo — assuming 3.5% home appreciation and 7% investment returns — after 5 years renting comes out ahead by about $392k. Renting wins if a similar home rents for under $9,865/mo. Adjust everything below — and see which assumptions actually move the answer.
Methodology#
The comparison follows the standard "invest the difference" approach: the renter invests the buyer's upfront cash (down payment + closing costs) and, each year, the difference between the buyer's total cost of ownership (mortgage payment, property tax, insurance, maintenance) and rent — in whichever direction it runs. The buyer's wealth is home equity net of selling costs; the renter's is the portfolio. Annual compounding; mortgage amortized monthly. Simplifications: no mortgage-interest tax deduction (the post-2017 standard deduction makes it irrelevant for most households), no capital-gains taxes on either side, no PMI or HOA (add them to maintenance if relevant), and constant rates throughout. The point of the sensitivity views is precisely that these second-order terms matter far less than the appreciation-vs-returns spread. Estimates for planning, not financial advice.
FAQ
- Is it better to rent or buy?
- It depends almost entirely on four things: how fast the home appreciates, what your investments would earn instead, how long you stay, and the rent-to-price ratio of your market. Under typical assumptions (3.5% appreciation, 7% investment returns, staying 5 years), renting comes out ahead for a $1,500,000 home vs $4,500/mo rent — but small changes in those inputs flip the answer, which is what the sensitivity charts on this page show.
- What is the most important variable in rent vs buy?
- The spread between home-price appreciation and what your invested money would earn otherwise. A house is a leveraged bet on home prices funded by cash that could compound elsewhere — if stocks outrun your home by a few points a year, renting usually wins; if the home keeps pace (with leverage), buying does. Mortgage rate, rent growth and how long you stay come next; insurance, taxes and closing costs rarely change the verdict.
- How long do I need to stay for buying to make sense?
- Upfront costs (closing, then ~6% selling costs) mean buying starts several tens of thousands behind and catches up over time. Under this page's default assumptions the breakeven is beyond 40 years — but check the "Advantage over time" chart with your own numbers.
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