Should I buy or rent a house?
The short answer
Rent if you'll move within 5 years, if buying takes more than 30% of income, or if the local price-to-rent ratio is above 20. Buy for stability, not as an investment.
Signals to weigh
- 01Time horizon — buying rarely pays off under 5 years due to transaction costs.
- 02Price-to-rent ratio in your zip code. Above 20 usually favors renting.
- 03Down payment leaves you a 6-month emergency fund intact.
- 04True cost of ownership: mortgage + tax + insurance + 1-2% maintenance/year.
How to decide
- Step 1Calculate the full monthly cost of ownership, not just the mortgage.
- Step 2Run a rent-vs-buy calculator for your zip code, honest inputs.
- Step 3Stress-test the payment against a 20% income drop.
- Step 4Only buy the house you'd be happy in for 7+ years.
Framework used
Cost-Benefit Analysis →Full walkthrough of the framework, with examples and pitfalls.
Consider these alternatives
- ·House-hacking — buy a small multi-unit and rent the others to cover the mortgage.
- ·Rent and invest the down-payment difference in a diversified index fund.
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