The break-even horizon
Buying carries large one-time costs at both ends — roughly 2% to 5% going in and 6% to 10% going out. Those costs have to be amortized across your holding period. Below roughly four years, they usually swamp any advantage from equity building. Above seven, ownership generally wins in most markets.
Opportunity cost is the missing variable
A down payment is capital that could be invested elsewhere. An honest comparison charges ownership for the return that capital would have earned. Most rent-versus-buy arguments ignore this in one direction or the other.
What actually decides it
Your expected tenure, local price-to-rent ratio, transaction costs, and how stable your income and location are. Rates matter, but they matter through the payment, and the payment is refinanceable. Run your own numbers in the rent vs buy calculator.
Frequently asked questions
What price-to-rent ratio favors renting?
Above roughly 20 to 1, renting is often financially competitive. Below 15 to 1, buying usually wins. These are heuristics, not rules.
Does building equity guarantee a good outcome?
No. Equity built through principal payments is savings, not return. Appreciation is the return, and it is not guaranteed.