Buy vs rent scenario
Buy vs rent when mortgage rates are high
Mortgage interest is the largest cost of owning in the early years. This case uses a 6.5% rate that stays high at renewal.
After 10 years, renting and investing finishes ahead of buying by about $69,616. On these assumptions buying does not overtake renting within 40 years.
Year-by-year results for this scenario
After 10 years, renting and investing finishes ahead of buying by about $69,616. On these assumptions buying does not overtake renting within 40 years. The owner's first-month cash cost is $4,315, compared with $2,325 for the renter.
| Year | Home value | Mortgage balance | Buyer net worth | Renter net worth | Buying minus renting |
|---|---|---|---|---|---|
| 1 | $621,000 | $471,971 | $112,778 | $157,809 | −$45,031 |
| 2 | $642,735 | $463,411 | $142,299 | $190,534 | −$48,235 |
| 3 | $665,231 | $454,285 | $173,123 | $224,616 | −$51,493 |
| 4 | $688,514 | $444,557 | $205,315 | $260,116 | −$54,801 |
| 5 | $712,612 | $434,187 | $245,995 | $297,101 | −$51,105 |
| 10 | $846,359 | $371,107 | $437,206 | $506,821 | −$69,616 |
Questions people ask
Does buying beat renting in this scenario?
After 10 years, renting and investing finishes ahead of buying by about $69,616. On these assumptions buying does not overtake renting within 40 years.
What changes in this scenario?
Mortgage interest is the largest cost of owning in the early years. This case uses a 6.5% rate that stays high at renewal. All other inputs keep the calculator’s default planning values.
Is this a forecast?
No. It is an illustration of how one assumption changes the buy vs rent comparison. Replace the inputs with your own numbers.
Other buy vs rent scenarios
- 5% down, 30-year amortization
- 20% down, ten years
- Five-year stay
- Seven-year stay
- Fifteen-year stay
- Full amortization
- Rates at 3.5%
- 4.5% now, 7% at renewal
Educational illustration; not advice. See the assumptions.