Calling rent “throwing money away” ignores that homeowners also pay interest, taxes, insurance, maintenance and transaction costs. The right answer depends on your situation.
Costs of owning that renters do not pay
Owners pay mortgage interest, property taxes, insurance, repairs and, often, HOA fees. A common guideline is to budget 1%–2% of the home's value each year for maintenance. Selling typically costs 5%–6% in agent fees and closing costs.
Time horizon and price-to-rent
If you may move within five years, transaction costs can outweigh appreciation. The price-to-rent ratio, the price divided by annual rent, helps: below about 15 generally favors buying, above about 20 generally favors renting.
Opportunity cost and non-financial factors
Money used for a down payment could be invested. On the other side, owning offers stability, control and forced savings through principal paydown. Run the numbers with realistic assumptions and weigh lifestyle priorities.
Try the numbers
Use our Rent vs Buy Calculator to see this in practice. With its default example (Home price: $400,000; Down payment: 20%; Mortgage rate: 6.5%), it shows buying wins by: $87,304. Adjust the inputs to match your situation.
Key takeaways
- Owners face costs beyond the mortgage payment.
- Plan to stay at least five years to offset buying costs.
- Compare net worth over time, not just monthly payments.
This article is for general education and is not personalized financial, tax or legal advice. Rules and limits change; confirm current figures with official sources such as IRS.gov, SSA.gov and StudentAid.gov, or consult a qualified professional. © 2026 FinanzCalc.