Launch the Interactive Rent vs Buy Simulator
Model custom rent inflation, down payments, property appreciation, and investment opportunity costs.
Open Rent vs Buy Tool →The Economic Reality of Renting vs. Buying
The decision to rent or buy a home extends beyond comparing monthly rent to a mortgage payment. Homeownership builds forced equity through amortization and asset appreciation, but entails substantial sunk costs including loan interest, closing fees, property taxes, insurance, and ongoing maintenance.
Key Drivers in the Rent vs. Buy Equation
Horizon Duration
Because transaction fees (up to 3% to buy and 6% to sell) are front-loaded, buying typically requires an occupancy horizon of at least 4 to 7 years to surpass renting financially.
Equity Velocity & Appreciation
Long-term historical housing appreciation (averaging 3% to 5% annually) coupled with principal paydown builds substantial net worth compared to unrecoverable rent payments.
Alternative Capital Yields
Renting allows capital that would have been locked in a down payment to compound in equities or index funds, offsetting housing equity growth during high interest rate cycles.