Buy vs. Rent — The Most Expensive Decision

Homeownership is the largest financial decision most people make. It's not always better than renting.

Costs of homeownership people forget:

Property taxes (1–2% of value/year)

Homeowners insurance (~$1,500/year)

Maintenance (~1–2% of value/year)

HOA fees (if applicable)

Closing costs when buying (2–5%) and selling (6–10%)

PMI if < 20% down

The break-even point:

Buying costs more upfront. Renting stays cheaper until equity builds and appreciation offsets costs. Typically takes 3–7 years to break even. If you move in < 3 years, renting is usually better financially.

When buying makes sense:

Plan to stay 5+ years

Have 20% down payment

Strong emergency fund remaining after purchase

Monthly payment ≤ 28% of gross income (front-end ratio)

Total debt ≤ 36% of gross income (back-end ratio)

The Price-to-Rent ratio:

Home price ÷ annual rent = P/R ratio

Below 15: likely better to buy; Above 20: likely better to rent

Reference:

Wikipedia: Rent or Buy

https://en.wikipedia.org/wiki/Home_equity