Question 1

Is it cheaper to rent or buy a home?

Accepted Answer

It depends entirely on your local market, how long you plan to stay, mortgage rates, and what you'd do with the money you save by renting. In expensive cities with low appreciation, renting and investing the difference often wins. In affordable markets with strong appreciation, buying can build serious wealth. The key variables are: purchase price-to-rent ratio, how long you'll stay, mortgage rate, and your alternative investment returns. Use this calculator to run the numbers for your specific situation.

Question 2

How much should I put down on a house?

Accepted Answer

The traditional advice is 20% to avoid Private Mortgage Insurance (PMI), which adds 0.5-1% of the loan amount annually. However, putting 20% down isn't always optimal. If you can earn more investing that money than PMI costs, a smaller down payment might make sense. FHA loans allow as little as 3.5% down. VA loans offer 0% down for veterans. The right answer depends on your cash reserves, investment returns, and how much you want your monthly payment to be.

Question 3

What is the 5% rule for rent vs buy?

Accepted Answer

The 5% rule, popularized by Ben Felix, says you should multiply your home's value by 5% and divide by 12 to get your monthly breakeven rent. If you can rent for less than that amount, renting is likely better financially. The 5% accounts for roughly 1% property tax, 1% maintenance, and 3% cost of capital (opportunity cost of your down payment + mortgage interest minus principal paydown). It's a useful rule of thumb, but this calculator gives you a more precise answer.

Question 4

Should I buy a house in my 20s?

Accepted Answer

Only if you're confident you'll stay in the same area for at least 5-7 years. Transaction costs (realtor fees, closing costs, moving expenses) typically eat 8-10% of the home's value. If you sell too soon, you'll likely lose money even in an appreciating market. Your 20s are often a time of career mobility — being locked into a mortgage can mean passing up a life-changing job offer in another city. That said, if you've found your city and the math works, locking in a low payment while your income grows can be powerful.

Question 5

How does home appreciation affect the rent vs buy decision?

Accepted Answer

Home appreciation is the single biggest swing factor. At 3% annual appreciation, a $400,000 home gains roughly $12,000 in the first year and increasingly more through compounding. Over 10 years at 3%, that home is worth $537,567. But appreciation isn't guaranteed — many markets saw 20-40% declines in 2008-2012. The historical national average is about 3-4% nominal (roughly matching inflation). Local markets vary wildly. This calculator lets you test different appreciation scenarios to see how sensitive your decision is.

Question 6

What hidden costs of homeownership do people forget?

Accepted Answer

The biggest ones: maintenance and repairs (budget 1-2% of home value annually), HOA fees (can be $200-$1,000+/month for condos), property tax reassessments, homeowners insurance increases, special assessments, landscaping, and the opportunity cost of your down payment. A $400,000 home with 20% down means $80,000 that's NOT invested in the stock market. At 8% returns, that's $6,400/year in foregone gains. Most rent-vs-buy calculators online ignore many of these costs, which is why people consistently underestimate the true cost of ownership.

Question 7

Does the mortgage interest tax deduction make buying better?

Accepted Answer

Less than most people think. Since the 2017 Tax Cuts and Jobs Act raised the standard deduction to $14,600 (single) / $29,200 (married filing jointly) for 2024, most homeowners don't have enough deductions to itemize. You only benefit from the mortgage interest deduction to the extent your total itemized deductions exceed the standard deduction. For a $300,000 mortgage at 7%, you'd pay about $21,000 in interest the first year — but a married couple would only benefit from the $21,000 - $29,200 = negative amount. You'd need additional deductions (state taxes, charitable giving) to make itemizing worthwhile.

Year	Net Buy Cost	Net Rent Cost	Winner	Difference
Year 5	$98.0K	-$75.3K	Rent	$173.4K
Year 10	$171.0K	-$78.7K	Rent	$249.7K
Year 15	$226.8K	-$116.6K	Rent	$343.4K
Year 20	$259.8K	-$211.8K	Rent	$471.6K
Year 30	$224.7K	-$761.8K	Rent	$986.6K

Scenario	10yr Net Diff	Winner	vs Base
Base CaseCurrent	$249.7K	Rent	—
Mortgage rate +1%	$321.7K	Rent	+$72.0K
Mortgage rate -1%	$179.7K	Rent	-$70.0K
Appreciation +2%	$153.7K	Rent	-$96.1K
Appreciation -2%	$329.0K	Rent	+$79.3K
Investment return +2%	$313.7K	Rent	+$64.0K
Investment return -2%	$196.3K	Rent	-$53.4K

Rent vs Buy Calculator

Home Purchase Details

Renting & Investment Details

Buying Wins Big

Cumulative Net Cost: Renting vs Buying

Net Cost Comparison at Key Milestones

Monthly Cost Breakdown (Year 1)

Buying

Renting

Sensitivity Analysis

Full 30-Year Breakdown

Frequently Asked Questions

Is it cheaper to rent or buy a home?

How much should I put down on a house?

What is the 5% rule for rent vs buy?

Should I buy a house in my 20s?

How does home appreciation affect the rent vs buy decision?

What hidden costs of homeownership do people forget?

Does the mortgage interest tax deduction make buying better?

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