Lesson · 15 min
Rent vs. buy: the honest math
The 5% rule and why your neighbor's 'renting is throwing money away' is wrong.
Owning has hidden costs: property tax, insurance, maintenance (rule of thumb: 1% of home value per year), closing costs, and interest that dwarfs principal in early years. A quick check: if annual rent < 5% of the purchase price, renting usually wins on money alone.
Vocab
- Amortization
- How each payment splits between interest and principal — mostly interest early on.
Quick check
1. A $400k house's rough yearly 'true cost' (tax + insurance + maintenance) is about…