Question 1

How long does it take for buying to be cheaper than renting?

Accepted Answer

The break-even point — when buying becomes cheaper than renting on a cumulative basis — typically ranges from 3 to 8 years depending on home price, mortgage rate, local appreciation, and how much rent would have increased. In low-appreciation markets with high property taxes, it can take 10+ years. In fast-appreciating markets with low property tax (like Florida or Texas no-income-tax areas), break-even can occur in 4–6 years. This calculator finds your exact break-even month.

Question 2

What costs are included in the true cost of buying a home?

Accepted Answer

The true cost of buying includes: mortgage principal and interest, property taxes (typically 0.5–2.5% of home value annually), homeowner's insurance (0.5–1% annually), private mortgage insurance if down payment is under 20% (0.5–1.5% of loan annually), HOA fees if applicable, maintenance and repairs (budget 1–2% of home value annually), closing costs at purchase (2–5% of home price), and selling costs when you sell (typically 5–8% including agent commissions). Many buyers focus only on the mortgage payment and underestimate total ownership cost by 30–50%.

Question 3

What is opportunity cost in rent vs buy analysis?

Accepted Answer

Opportunity cost is what your down payment could have earned if invested instead of used to buy a home. If you put $60,000 down on a house, that money is tied up in home equity. If invested in a diversified index fund averaging 7% annually, it would grow to roughly $115,000 in 10 years. This potential growth is a real cost of buying that most calculators ignore. A proper rent vs buy analysis includes this opportunity cost against the equity and appreciation gained from owning.

Question 4

What is the 5% rule for renting vs buying?

Accepted Answer

The 5% rule, popularised by financial planner Ben Felix, states that the annual unrecoverable cost of owning a home is approximately 5% of the home's value: roughly 1% for maintenance, 1% for property tax (varies), and 3% for the cost of capital (mortgage interest plus opportunity cost on equity). If your annual rent is less than 5% of the home's purchase price, renting is likely the more financially efficient choice. For a $400,000 home, that's $20,000 per year or $1,667 per month.

Question 5

Should I buy a home if I might move in 3 years?

Accepted Answer

Generally, buying a home you plan to sell within 3 years is financially risky. Closing costs at purchase (2–5%) plus selling costs (5–8%) mean you start roughly 7–13% underwater. You need enough appreciation and equity paydown to overcome those costs before the break-even point. In most markets, 3 years is not enough time. This calculator shows you the exact break-even point for your specific inputs so you can evaluate your own situation.

Rent vs Buy Calculator

Rent vs Buy Calculator: What's Actually Compared

What's included in the cost to buy

What's included in the cost to rent

Why the break-even point matters

What is the 5% rule?