The short answer
On a $400,000 home (20% down, 6.5%, 30 years) versus $2,000/month rent, owning costs $2,855.95/month in total versus a starting rent of $2,000. Investing that $855.95+ monthly gap at a 7% return outpaces the equity buying builds — after 7 years, renting-and-investing is ahead by about $129,756, with buying not catching up within that window. Change the appreciation rate, investment return, or the rent-to-buy cost gap, and this result can flip.
Key takeaways
- The full monthly cost of owning ($2,855.95 here) is almost always higher than the mortgage payment alone once property tax ($400), insurance ($100), and maintenance ($333.33) are added.
- Whenever owning costs more per month than renting, that gap becomes the renter's investable surplus — and at a 7% assumed return, it can compound faster than home equity builds at a 3% appreciation rate.
- This calculator found no breakeven year within a 7-year horizon at these defaults — buying's net position never overtook renting-and-investing in that stretch.
- The result is highly sensitive to your own numbers: a smaller rent-to-buy cost gap, higher appreciation, or a lower investment-return assumption can tip the outcome toward buying.
Comparing full monthly costs, not just the mortgage
Mortgage (P&I) = $2,022.62 + Property tax = $400.00 + Insurance = $100.00 + Maintenance = $333.33
Total monthly cost of owning = $2,855.95
It is easy to compare a mortgage payment directly to rent and conclude buying is cheaper, but the mortgage principal-and-interest payment is only part of the real monthly cost. Property tax (1.2% of value annually here), homeowners insurance, and maintenance (budgeted at 1% of home value per year) add another $833.33/month in this example — pushing the true cost of owning well above the $2,022.62 mortgage payment alone, and above the starting $2,000 rent.
Why renting can win, even over 7 years
Tracking net position — equity or investment value minus everything paid in — year by year:
| Year | Buy: Equity − Total Paid | Rent: Investments − Total Paid |
|---|---|---|
| 1 | -$18,694.69 | $71,471.41 |
| 4 | -$71,072.76 | $43,759.44 |
| 7 | -$117,282.32 | $12,473.58 |
Buying's net position looks negative throughout this window because it nets total cash outlay (down payment plus every mortgage, tax, insurance, and maintenance payment) against equity gained — a meaningful share of what you pay for a home in the early years is interest, taxes, and upkeep that never becomes equity. Renting's net position stays positive because the invested surplus, compounding at 7%, grows faster than what is paid out in rent. This is exactly why the standard advice to "buy if you'll stay long enough" needs real numbers behind it — the crossover point depends on your specific rate, price, rent, and return assumptions, not a fixed number of years.
Related calculators
- Real Estate Investment Calculator — run the numbers if you're buying to rent out, not live in.
- Rent Affordability Calculator — check how much rent fits your budget before comparing to buying.
- Mortgage Calculator — break down the mortgage payment used in this comparison.