The Process
Should I rent or buy a house?
The short answer
Whether renting or buying costs less depends mostly on how long you’ll stay, not on the rule of thumb that “renting is throwing money away.” Buying carries large one-time costs — a down payment, roughly 2–5% in closing costs to buy, and 6% or more in selling costs when you leave — that only pay off if you own long enough for appreciation and principal paydown to outweigh them. The honest way to compare is net cost over your expected holding period: for owning, upfront cash plus carrying costs (mortgage, tax, insurance, maintenance, HOA) minus what you recover at sale; for renting, rent paid minus the investment return you’d earn on the cash a buyer ties up. The year those two net costs cross is the break-even.
Key points
- How long you’ll stay is the biggest factor — short stays usually favor renting.
- Buying has large one-time costs to enter and exit that a short hold can’t recover.
- Renting frees up the down payment to invest — a real, quantifiable benefit.
- Compare net cost over your holding period, not monthly rent vs. monthly payment.
Why the monthly-payment comparison misleads
Comparing a monthly rent to a monthly mortgage payment ignores the biggest numbers: the down payment and closing costs to buy, the selling costs to leave, home appreciation, and the investment return a renter earns on money not tied up in a house. A full comparison nets all of these over the years you actually plan to stay.
The break-even year
The break-even is the point where owning stops costing more than renting. Sell before it and renting was cheaper; stay past it and buying pulls ahead. It moves with your assumptions — faster appreciation, higher rent increases, or a lower investment return all shorten it. The Rent vs. Buy tool computes it for your numbers.
Common questions
- Is renting really throwing money away?
- Not necessarily. Rent buys housing without the entry and exit costs of ownership, and it frees the down payment to invest. Over a short stay, renting is often the lower-cost choice; over a long one, buying usually wins. It depends on the numbers and the holding period.
Put this to work
Sources
Every claim above traces to a public government source.
- ViewT1House Price Index (purchase-only, USA)
Federal Housing Finance Agency · Government / primary · 2025
- ViewT1American Community Survey — median gross rent (table B25064)
U.S. Census Bureau · Government / primary · 2023
- ViewT1Publication 936: Home Mortgage Interest Deduction
Internal Revenue Service · Government / primary · 2024