Rent vs. buy

Rent or buy: where does each leave you?

Put in the home you are looking at, the rent you would pay instead, and how long you plan to stay. The answer depends mostly on time.

How long you plan to stay

Years in the home7

Buying

Home price$500,000

Down payment10%

Interest rate6.75%

Loan term (years)30

Property tax per year (% of home value)1%

Homeowners insurance per month$150

HOA per month$0

Maintenance per year (% of home value)1%

Buying costs (% of price)3%

Selling costs when you move (% of sale price)6%

Home value change per year3%

Renting

Monthly rent$2,800

Rent increase per year3%

Renter's insurance per month$20

Your savings

Money not spent on the home (the down payment, buying costs, and any month one path costs less) is assumed to be invested at this return.

Investment return per year5%

Where you stand after 7 years

If you buy

$169,497

home equity after selling, plus savings

If you rent

$182,220

savings and investment growth

With these numbers, renting leaves you about $12,723 further ahead after 7 years.

Buying catches up with renting in year 9 at these numbers.

Cash needed to buy (down payment + buying costs): $65,000
First-month cost to own: $3,902
of which principal & interest: $2,919
First-month cost to rent: $2,820
Total paid to own over 7 years: $399,395
Total paid to rent over 7 years: $259,139
Home value after 7 years: $614,937
Loan balance left: $408,544
Selling costs: $36,896
Equity after selling: $169,497

Planning estimate only, not a quote or advice. Leaves out mortgage insurance, tax deductions, and taxes on investment gains. Home values, rents, and returns can move in either direction.

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