Is It Cheaper to Rent or Buy a House?

"Rent is dead money" is not an argument

Buying has dead money in it too, and in the early years there is a great deal of it. Mortgage interest, property tax, insurance, maintenance and both ends of the transaction are gone the moment they are spent — they build no equity and come back to you never. On the default figures, the first mortgage payment is around 85% interest.

The breakdown above totals those costs so they can be compared with rent directly. That is the honest version of the comparison: not rent against the whole mortgage payment, but rent against the part of ownership that is equally unrecoverable.

What ownership adds on top is the principal you repay and whatever the home appreciates. Those are real, and they are also slow — which is why the answer is a date rather than a verdict.

Holding the budget equal

Both paths spend the same amount every month. Whichever is cheaper invests the difference at your expected return, taxed as a brokerage account would be. Crucially, the renter also invests the deposit and the closing costs on day one — money the buyer has handed over and cannot invest.

That opening gap is why buying starts so far behind, and it is the part most comparisons omit. A renter with $103,500 invested and a buyer with $103,500 of equity in a house that has just cost 3% to acquire are not in the same position, and pretending otherwise settles the question before it is asked.

At the horizon the buyer sells: net worth is the home’s value less selling costs and the remaining mortgage, plus anything invested alongside. The renter’s is simply their portfolio. The breakeven reported is the first month buying takes the lead and does not give it back.

The assumption doing the heavy lifting

Appreciation. It is the single input that most changes the answer and the one nobody can know. Set it to zero and buying takes far longer to win; set it to 6% and buying wins almost regardless of everything else, because the gains apply to the whole house rather than to your equity in it.

Long-run US house prices have tracked reasonably close to inflation, which makes anything much above 3–4% an aggressive assumption rather than a neutral one. It is worth running the calculator twice — once at a rate you would defend and once at zero — and seeing whether the decision survives.

Maintenance is the second omission. At 1% of value a year it is a rule of thumb, not a budget, and older properties routinely exceed it. It is also the cost people most often leave out of a rent-versus-buy comparison entirely, which quietly moves the breakeven forward by years.

Neither of those, nor anything else here, prices what a home is actually for. Security of tenure, the freedom to change the place, the cost and disruption of moving, and being tied to one city are all real considerations, and none of them are dollars.