Rent vs Buy 7-Year Rule Guide
Use the 7-year rule as a starting heuristic, then replace it with scenario-based math.
What the 7-year rule means
The rule suggests buying is often more favorable if you expect to stay around seven years or longer. The intuition is that upfront transaction costs need time to amortize, and equity builds slowly in early mortgage years.
When the rule fails
The seven-year benchmark can break in either direction depending on local costs and assumptions.
- Shorter break-even: high rents, modest purchase costs, stronger appreciation
- Longer break-even: high taxes, large maintenance burden, high sell costs, low expected hold period
- Uncertain break-even: probable move within a few years
Scenario matrix to run
Model at least three scenarios before deciding:
- Conservative: lower appreciation, higher maintenance, higher sell costs
- Baseline: current best estimate
- Optimistic: stronger appreciation and stable ownership costs
If buying only wins in optimistic assumptions, the decision is fragile.
Decision checkpoint
- Expected stay duration exceeds your modeled break-even by a safe margin
- Post-closing reserves remain healthy
- Total net cost win is robust across conservative and baseline scenarios
- Lifestyle and job-location flexibility are still acceptable
Run the Numbers
Use the Rent vs Buy Calculator to model total net cost over your expected stay, then sanity-check payment structure with the Mortgage Calculator.