How the comparison works
Net cost of buying adds the down payment, closing costs, mortgage payments, property tax, insurance and maintenance, then subtracts the cash you would get by selling: the home value minus selling costs and the remaining loan balance.
Net cost of renting is the rent you pay minus what your down payment and closing costs would have earned if you had invested them instead.
Buying usually wins the longer you stay, because the upfront and selling costs are spread over more years and equity keeps growing. Short stays tend to favor renting.
Example
Buying a $400,000 home with $80,000 down, compared with renting for $2,200 a month, over 10 years: buying is cheaper by $31,489. Buying becomes the cheaper option in year 7.
Frequently asked questions
What does the break-even year mean?
It is the first year in which the net cost of buying drops below the net cost of renting.
Why does a short stay favor renting?
Closing costs when buying and agent fees when selling are paid once. Over a short stay they are not offset by equity growth and appreciation.
What is not included?
Tax deductions, renters insurance, HOA fees and moving costs are not included. The estimate also assumes the growth rates you enter stay the same every year.