Rent vs. Buy: How to Decide
The rent vs. buy decision is about more than just the monthly payment. Buying builds equity, but comes with hidden costs. Renting offers flexibility, but you build zero wealth. Our calculator shows the full financial picture.
When Buying Wins
- You plan to stay 5+ years in the same place
- Home prices and rents are rising in your area
- You can afford a 20% down payment (avoids PMI)
- You value stability and the ability to customize your space
When Renting Wins
- You might move within 3 years
- You cannot comfortably afford a down payment + closing costs
- You want flexibility — changing jobs, cities, or lifestyles
- The rent-to-price ratio in your city favors renting
The 5% Rule
A quick mental shortcut: multiply the home price by 5%, divide by 12. If monthly rent is lower than that number, renting is cheaper month-to-month. For a $400,000 home: 5% = $20,000/year = $1,667/month. If rent is below $1,667, you are likely better off renting in the short term.