Renting vs Buying: How to Run the Numbers for Your Situation

The debate that never gets a straight answer

In thirty years of wealth management, I’ve been asked hundreds of questions. None came up more often than this one: “Should I rent or buy?” And every single time, my answer was the same — it depends on your numbers, not on conventional wisdom.

The real estate industry will tell you that renting is throwing money away. Your landlord will tell you that owning is a money pit. Both sides have a point, and neither is giving you the full picture. The truth is that buying a home is sometimes the best financial move you’ll ever make, and sometimes it’s a decision that sets you back a decade. The difference comes down to roughly a dozen variables that are unique to your situation — your income, your savings, your local market, how long you plan to stay, and what else you’d do with the money.

This guide walks through the math using three calculators that, taken together, give you an honest comparison. No hand-waving, no slogans. Just numbers.

Step 1: Find out what you can actually afford to buy

Before you compare renting to buying, you need to know what buying actually looks like for you. Not a fantasy number pulled from a listing app — a realistic purchase price based on your income, your debts, and your savings.

Too many people skip this step. They see homes listed at $425,000 in their area and assume that’s their starting point. But if your household income is $85,000 and you have $18,000 in student loans, that $425,000 home may push your debt-to-income ratio well past what any responsible lender — or any responsible financial planner — would recommend.

Use the House Affordability Calculator to establish a realistic ceiling before you go any further:

The number you get here is a maximum, not a target. In my practice, I always advised clients to aim for 10-15% below whatever the calculator said they could afford. That cushion is what keeps you from becoming house-poor — able to make the mortgage payment but unable to save, invest, or handle a $4,000 furnace replacement in February.

Step 2: Calculate the true monthly cost of owning

Once you have a realistic purchase price, the next step is figuring out what that home would actually cost you each month. The mortgage payment is the headline number, but it’s not the whole story. Property tax, homeowner’s insurance, PMI if you’re putting down less than 20%, and maintenance all add up.

A client of mine once fell in love with a $340,000 townhouse. The mortgage payment at 6.8% with 10% down came to about $1,990 a month. Reasonable enough on a $95,000 salary. But after we added property tax ($385/month), insurance ($145/month), PMI ($125/month), HOA fees ($220/month), and a conservative maintenance budget ($280/month), the true monthly cost was $3,145. That’s a very different number than $1,990, and it changed her decision entirely.

Use the Mortgage Calculator to model the specific scenario that matches your affordability number from step 1:

Pay attention to the total interest paid over the life of the loan. On a 30-year mortgage at current rates, you’ll often pay more in interest than the original loan amount. That total cost of borrowing is a critical piece of the rent-versus-buy equation that people routinely overlook.

Step 3: Get an honest picture of your rental costs

Now for the other side of the ledger. Renting gets dismissed as “throwing money away,” but that framing ignores several realities. Renters don’t pay for a new roof when hail hits. Renters don’t lose $30,000 if the local housing market dips in the first three years. Renters have flexibility to relocate for a better job without selling a house in a cold market.

That said, rent increases are real and compounding. If you’re paying $1,800 a month today and rents in your area are climbing 4% annually, you’ll be paying $2,190 in five years and $2,665 in ten. Over a long enough timeline, those increases erode the cost advantage of renting.

Use the Rent Calculator to project your rental costs forward and understand the long-term trajectory:

When you compare the rental projection to your mortgage scenario from step 2, make sure you’re comparing total costs — not just the base payment. Include renter’s insurance on the rental side (typically $15-30 a month) and all those ownership extras on the buying side.

The factors the calculators can’t capture

Numbers are the foundation of this decision, but they’re not the entire house. A few things worth weighing that don’t show up in a calculator:

• Time horizon matters enormously. If you’ll stay in the home for seven years or more, buying usually comes out ahead because you’ve had time to build equity and absorb the transaction costs (closing costs, realtor commissions) that eat into short-term gains. Under five years, renting frequently wins on pure math.
• Opportunity cost is real. A $60,000 down payment invested in a diversified index fund averaging 7-8% annually would grow to roughly $84,000 in five years. That’s the return you’re forgoing by locking that capital into a house. Homeownership builds equity, but so does investing.
• Lifestyle flexibility has a value. Early in my career, I turned down a lucrative opportunity in another city because I’d just bought a home and didn’t want to sell at a loss. That decision cost me more than any mortgage payment ever did.
• Maintenance is unpredictable. The 1% rule (budget 1% of the home’s value annually for maintenance) is a floor, not a ceiling. Older homes, homes with pools, and homes in harsh climates routinely cost more.

A framework I used with clients

After running the three calculators above, I’d ask clients to write down two numbers: the all-in monthly cost of buying (mortgage, tax, insurance, PMI, maintenance, HOA) and the projected monthly cost of renting (rent, renter’s insurance, utilities difference). If buying was more than 40% above renting in their market, I’d generally recommend they keep renting and invest the difference. If buying was within 10-15% of renting and they planned to stay at least five years, ownership usually made sense.

There’s no universal answer. A couple earning $140,000 in a Midwestern city where $280,000 buys a solid three-bedroom home is in a completely different position than a single professional earning the same amount in a coastal market where that money gets a one-bedroom condo with a $650 HOA.

Run your numbers. Compare the totals honestly. And whatever you decide, make sure the decision is based on a spreadsheet, not a slogan.