Personal Finance · Interactive Tool
Rent or buy?
"Renting is throwing money away." You've heard it. But a mortgage payment isn't the whole story, and neither is rent. The honest comparison treats both as financial decisions: the renter invests the down payment they didn't spend, and we track each person's net worth over time. Then the real question isn't "rent or buy?" but "how long until buying wins?"
The home
Renting instead
Your assumptions
Net worth: buyer vs renter
Both people spend the same each month; whoever's housing is cheaper invests the difference, and the renter keeps the down payment invested. The lines cross at the break-even: before it, renting is ahead; after it, buying is. Here that's about 6.3 years.
- Buyer's net worth
- $215,057
- Renter's net worth
- $211,254
- Price-to-rent ratio
- 15.2
- Break-even
- ~6.3 yr
The price-to-rent ratio (15.2) is a quick gut check: below about 15, buying tends to win; above ~21, renting usually does. But the answer depends most on one guess: home appreciation. Nationally prices rose 4.3%/yr since 1987, yet they fell 27% from 2006–2012, and even over rolling 10-year spans they ranged from -0.4% to 8.4% a year. A home is a leveraged, undiversified bet. Try the "Flat" and downturn cases above and watch the break-even move. Educational only, not advice.
How this comparison works
- The down payment has a cost. The biggest hidden cost of buying isn't the mortgage. It's the money tied up in the home that could otherwise be invested. So the renter here keeps that cash in the market, and both people spend the same amount each month; whoever's housing is cheaper invests the difference. That's what makes it fair.
- Buying has big one-time costs. Closing costs going in and agent commissions coming out (often ~6% to sell) mean a home has to appreciate for years just to recover them. That's why buying tends to lose on short stays and win on long ones, and why the break-even year is the number that matters.
- Appreciation is a guess, and a risky one. The result depends most on how fast the home grows in value. Nationally, prices rose about 4.3% a year since 1987, but they fell 27% from 2006–2012, and a home is a leveraged, undiversified bet on a single property in a single town. Treat the appreciation slider as the uncertainty it is.
There are good reasons to buy that this tool can't price: stability, control, not having a landlord, forced saving. And good reasons to rent: flexibility, diversification, less risk. This shows the money side clearly so the rest of the decision is yours. Educational only, not advice.
Sources & further reading
How this tool was made
A live comparison computed from the numbers you enter. Its defaults and its uncertainty figures come from real series via FRED — the 30-year mortgage rate and the S&P/Case-Shiller US National Home Price Index, which also supply the worst historical drawdown and the rolling-return range.
Data
- Federal Reserve Economic Data (FRED), Federal Reserve Bank of St. Louis. Series retrieved from FRED and cited to their originators per FRED's terms of use: Treasury yields (Board of Governors), CPI (BLS), 30-year mortgage rates (Freddie Mac PMMS), consumer credit rates (Board of Governors). The S&P Cotality Case-Shiller home-price index (© S&P Dow Jones Indices) is marked 'pre-approval required' on FRED, so only three headline statistics computed from it (long-run appreciation, worst drawdown, rolling-return range) appear here; the index levels are not republished.
Educational use only, not financial advice. Every figure traces back to the sources above or to the inputs you set — the full method and the source code are public.