Should you keep renting in San Mateo or buy a home and start building equity? It’s a big decision, especially in a market where prices are high and monthly costs add up fast. You want a clear, numbers-first way to compare your options without hype.
In this walkthrough, you’ll see how to stack monthly costs side by side, how 5- and 10-year outcomes can differ, and which assumptions flip the verdict. We’ll use simple, transparent math with San Mateo context and clearly labeled example numbers. Let’s dive in.
What to compare
A clean rent vs buy comparison looks at total cost over time, not just one monthly payment.
- Upfront costs: down payment plus buyer closing costs.
- Monthly ownership costs: mortgage principal and interest, property taxes, homeowners insurance, HOA fees if any, maintenance, and PMI if you put less than 20% down.
- Taxes: potential mortgage interest and property tax deductions, subject to limits like the federal SALT cap.
- Opportunity cost: the return you might have earned if you invested your upfront cash instead of buying.
- Sale costs: typical seller fees and closing costs when you exit.
San Mateo factors to note
- High purchase prices: Larger loan amounts drive higher monthly payments and raise the bar for break-even.
- Property taxes under Proposition 13: Your assessed value resets at purchase, and annual increases are generally capped afterward. See the San Mateo County Treasurer-Tax Collector’s property tax overview for local details.
- HOA and maintenance: Condos and townhomes often have meaningful HOA fees; older single-family homes may need higher maintenance reserves.
- Inventory and demand: Tight supply and job centers nearby can support appreciation, but short holding periods are riskier because transaction costs are high.
- Mortgage rates: Rate moves change monthly payments quickly. Track averages with the Freddie Mac Primary Mortgage Market Survey for context on trends.
Monthly snapshot examples
The numbers below are illustrations to show how the pieces fit together. Update them with current prices, rents, rates, and HOA fees before you decide.
Example: single-family home
Assumptions for illustration only:
- Purchase price: $1,700,000
- Down payment: 20% ($340,000)
- Loan: $1,360,000, 30-year fixed at 6.5%
- Monthly principal and interest: about $8,597
- Property tax: roughly 1.10% of purchase price per year, about $1,558 per month when converted
- Homeowners insurance: about $100 per month
- Maintenance: rule of thumb 1% per year, about $1,417 per month
- HOA: $0 in this SFH example
- Comparable rent: assume $6,500 per month for a similar home
What this means each month:
- Estimated owner carrying cost before tax: about $11,672 (PI + taxes + insurance + maintenance)
- Estimated rent: $6,500
On cash flow alone, renting looks cheaper in the early years in this example. The difference is that a portion of your mortgage payment builds equity, and you may benefit from appreciation over time.
Example: condo or townhome
Assumptions for illustration only:
- Purchase price: $1,100,000
- Down payment: 20% ($220,000)
- Loan: $880,000, 30-year fixed at 6.5%
- Monthly principal and interest: about $5,559
- Property tax: roughly $1,008 per month at 1.10% annually
- Insurance: about $70 per month
- HOA: example $650 per month
- Maintenance reserve: lower than a SFH in many buildings; example $400 per month
- Comparable rent: assume $4,000 per month for a similar unit
Estimated owner carrying cost before tax: about $7,687 per month vs $4,000 to rent in this example. The HOA meaningfully changes the math compared with a single-family home, even at a lower price point.
Five- and ten-year view
Upfront and sale costs, plus equity and appreciation, decide the long-term outcome. Using the single-family example above with a 3% annual appreciation scenario:
- Principal repaid: about $87,257 after 5 years, about $205,806 after 10 years.
- Home value growth: to about $1,970,761 at 5 years and $2,283,100 at 10 years.
- Equity before selling costs: about $698,018 at 5 years, about $1,128,906 at 10 years.
- Sale costs: assume 6% of sale price when you sell.
Key takeaway: appreciable equity can build over time, but high carrying and transaction costs make short holding periods harder to justify. Many buyers in high-cost markets need a longer stay to reach break-even.
What flips the outcome
Small changes in assumptions can change the answer quickly.
- Time horizon: Longer stays favor buying because you spread closing and selling costs over more years.
- Appreciation: Moving from 2% to 5% annual appreciation compounds into a very different equity picture by year 10.
- Mortgage rate: A 1% lower rate can cut the monthly payment significantly, improving cash flow and break-even.
- Down payment: Less than 20% can add PMI and increase risk; more down lowers monthly costs but raises your opportunity cost.
- Rent growth: If rents rise faster than expected, buying can become attractive sooner.
Build your own model
You can recreate the math in a basic spreadsheet. Here are the core steps:
- Inputs to gather
- Purchase price, down payment, loan rate and term
- Property tax rate, expected insurance, HOA, and maintenance reserve
- Expected appreciation and rent growth rates
- Buyer closing costs percent and seller cost percent
- Monthly mortgage payment
- Formula: payment = P * r / (1 − (1 + r)^−n)
- P = loan amount, r = monthly interest rate, n = total payments
- Track equity and value
- Home value at time t: PurchasePrice * (1 + appreciation)^t
- Remaining balance after k payments: amortization formula
- Equity at time t: HomeValue_t − RemainingBalance_t
- Renting cost over time
- Sum monthly rents with your rent growth assumption and add renter’s insurance.
- Sale and net result
- Net proceeds = SalePrice − RemainingBalance − SellingCosts
- Compare total cost of owning to total rent paid, and consider tax effects.
Tip: benchmark rates using the Freddie Mac Primary Mortgage Market Survey, and refresh your property tax estimates from the San Mateo County Treasurer-Tax Collector before you finalize assumptions.
Taxes in brief
- Mortgage interest deduction: Deductible within federal limits; see IRS Publication 936 for details.
- Property tax deduction: State and local tax deductions are subject to the federal SALT cap; see IRS Topic No. 503 for an overview.
- Capital gains exclusion: If you sell a primary residence after meeting IRS tests, you may exclude up to $250,000 of gain if single or $500,000 if married filing jointly; see IRS Publication 523.
Tax outcomes vary by household. Consider speaking with a tax professional before you rely on any estimated savings.
Practical next steps
- Clarify your time horizon: Are you likely to stay 3, 5, 7, or 10-plus years?
- Tighten your assumptions: Update price, rent, and rate inputs with current local data.
- Run two property types: Compare a single-family and a condo or townhome with realistic HOA and maintenance.
- Stress-test: Re-run your model with rate ±1%, appreciation at 0%, 3%, and 5%, and rent growth at 1%, 3%, and 5%.
- Align with life plans: Layer in non-financial priorities like stability, commute, and future flexibility.
If you want a local, numbers-forward view tailored to your situation, reach out. We can walk you through a clear framework, align the math with your goals, and map next steps on the Peninsula. Schedule a personalized consultation with Jlu Real Estate.
FAQs
How do I compare rent vs buy in San Mateo from scratch?
- List your upfront cash, all monthly owner costs, likely rent, expected appreciation and rent growth, then model 5- and 10-year outcomes including sale costs and equity.
How does Proposition 13 affect a new buyer’s taxes?
- Your assessed value resets at purchase, then generally increases modestly each year; review the San Mateo County Treasurer-Tax Collector’s guidance when estimating property taxes.
Are mortgage interest and property tax deductions big in this area?
- They can help, but the federal SALT cap limits property tax deductions for many households; see IRS Publication 936 and IRS Topic No. 503 for rules.
Do I need 20% down to buy in San Mateo?
- No, but less than 20% can add PMI and increase monthly costs and risk; include PMI in your model and compare 5%, 10%, and 20% down scenarios.
How do HOA fees change the rent vs buy math?
- HOA dues raise your monthly carrying cost and can delay break-even, so compare a condo or townhome scenario to a single-family scenario with accurate HOA assumptions.
What should I assume for rent increases?
- A 1% to 5% range is common for sensitivity tests; you can reference Bureau of Labor Statistics rent indexes for broader context on rent trends.
