Rent or buy? Compare the money you never get back.

Few money questions carry as much feeling as this one. Owning a home is bound up with security, family and a sense of having arrived; renting is often described, unkindly, as paying someone else's mortgage. Neither picture survives the arithmetic. Buying a home is an investment with high transaction costs, a large loan and a long payback period. Renting is a cost that buys flexibility and frees cash to invest elsewhere. Which comes out ahead depends on a handful of numbers you can look up, and one you have to be honest with yourself about.

This guide works through the decision on a real rate and a realistic price. On October 29, 2026, Freddie Mac's weekly survey put the average 30-year fixed rate at 7.24% (Freddie Mac PMMS via FRED). The median sales price of new houses sold was $393,300 in the third quarter (Census and HUD via FRED). Our example uses a $400,000 home, and the rent vs. buy calculator runs the same model on your own figures.

The wrong comparison, and the right one

The usual comparison puts the mortgage payment next to the rent. On a $400,000 home with 20% down, a $320,000 loan at 7.24% costs $2,181 a month in principal and interest. If a similar home rents for $2,400, buying looks like the cheaper choice and a way to build equity besides.

It isn't, for two reasons. First, the payment is only part of what an owner spends. Property tax, insurance and maintenance come on top, and none of them come back. Second, the buyer has handed over $86,700 at closing: an $80,000 down payment plus about $6,700 in closing costs. The renter still has that money, and can invest it.

So the fair comparison gives both households the same cash on day one and the same housing budget every month. The renter invests the down payment and closing costs. Each month, whichever household spends less on housing invests the difference. When the owner sells, we count what each one has: for the owner, the sale price minus selling costs and the mortgage still owed, plus any savings; for the renter, the investment account. That is the model behind the calculator, and the one the rest of this guide uses.

What owning costs each month

Take the first month of owning our $400,000 home, using national averages for the costs a lender doesn't show in the payment:

Property tax uses 0.89% of the home's value, the 2024 U.S. average from Census survey data; state averages ran from 0.31% in Hawaii to 1.79% in Illinois (NAHB). Insurance is close to the $1,522 average premium Freddie Mac found for 2023 (Freddie Mac), and premiums have risen since. Maintenance at 1% of the value a year is a rule of thumb rather than a measured figure; a new house may need less for a decade and an old one far more in a single bad year.

The owner spends $536 a month more than the renter, and the renter invests it. Not all of the owner's $2,936 is gone, though. In the first month, $250 of the payment reduces the loan; the other $1,931 is interest. That principal is the owner's saving, and it grows every month as the loan ages.

Rent isn't wasted, and neither is all of a mortgage

A more useful split is between money that comes back and money that doesn't. For the owner, the unrecoverable costs in the first month are the $1,931 of interest, $297 of tax, $125 of insurance and $333 of upkeep, plus something easy to forget: the return the $86,700 would have earned if it had been invested instead. At 5% a year, close to the 10-year Treasury yield of 4.98% on October 29 (FRED), that is about $353 a month. Together, the owner's unrecoverable costs come to about $3,039, against $2,400 of rent.

Against that, the owner expects the house to gain value. U.S. house prices rose 2.1% from the second quarter of 2025 to the second quarter of 2026 (FHFA). On $400,000, that is about $700 a month, which brings the owner's net cost down to roughly $2,339, a little below the rent. But that gain is only a paper gain until the house is sold, and selling is expensive.

You may have met the "5% rule", which estimates the yearly unrecoverable cost of owning at 5% of the price. In our example, the first-year figure before any price growth is about 9% of the price. The rule was built for lower mortgage rates; at today's, the rate does most of the work, and a quick rule is no substitute for running your own numbers.

The answer is a date, not a verdict

Run the two households forward. The owner's equity grows as the loan is paid down and the home gains value; the renter's account grows from the down payment and the monthly differences. Rent rises 2.8% a year, matching the twelve-month rise in the consumer price index for rent of a primary residence to September 2026 (BLS). The house gains 2.1% a year, and selling costs 6% of the price.

After seven years, the house is worth about $462,600. Selling costs take about $27,800, and the owner still owes about $292,700 on the loan, leaving $142,100. The renter's account, with the down payment and seven years of monthly differences invested at 5%, holds about $161,200. Renting is ahead by about $19,000.

But the gap is closing. The owner's monthly cost is mostly fixed while rent rises, the loan pays down faster each year, and the one-time costs of buying and selling are spread over more years. In this example, buying pulls ahead in year 11. After fifteen years, the owner is about $44,100 ahead.

That is the shape of almost every rent-or-buy comparison: buying starts behind, because of what it costs to get in and out, and catches up over time. The question isn't which is better in general; it's whether you will stay past the crossing point. A household that expects to move for work in five years and one that plans to stay for twenty can look at the same house and rightly reach opposite answers.

What moves the crossing point

Change one input at a time from our example and the year buying pulls ahead moves a long way:

• The rent for a comparable home. At $2,800 instead of $2,400, buying is ahead from year 5 and by about $24,200 at year seven. At $2,000, buying doesn't pull ahead until year 29.
• The mortgage rate. One point lower, at 6.24%, the payment falls to $1,968 and buying pulls ahead in year 7, about $6,900 ahead at that point. This is why the decision feels different from one year to the next.
• Price growth. If the home gains 4% a year rather than 2.1%, buying is ahead from year 4. Growth is the least predictable input, and over seven years it is also one of the most powerful.
• What the renter earns. If the renter's savings earn 7% rather than 5%, the crossing point moves to year 21. A renter who doesn't invest the difference at all, or spends it, loses most of renting's advantage.
• The down payment. With 10% down, the larger loan and private mortgage insurance raise the first month's cost to $3,373, and buying doesn't pull ahead until year 16. PMI stops when the scheduled balance reaches 78% of the original value, at which point the servicer must end it automatically (CFPB).

The calculator turns this around and gives the rent at which the two choices tie. For our $400,000 home, staying seven years, it is about $2,576 a month: if a comparable home rents for more, buying comes out ahead by then; for less, renting does. Staying ten years, the tie rent falls to about $2,419; staying three, it rises to about $3,135. For a quick screen, compare the price with a year's rent. Our home costs about 14 times a year's rent; the higher that ratio in your area, the higher the bar for buying.

Who should keep renting, and who should look at buying

Worth running the numbers to buy: households that expect to stay put for well beyond the crossing point the calculator shows, that have the down payment without touching their emergency fund, and that live where comparable homes rent for a high share of their price. Stability has a value no calculator captures, and for a family with children in school it may be the deciding factor.

Better served by renting for now: anyone likely to move within about five years, anyone whose down payment would leave no cash reserve, anyone in a market where homes cost many times a year's rent, and anyone whose job or income is uncertain. Renting also suits people who will invest the difference, and only them. The renter's advantage in every example here comes from money invested, not money spent.

What the model leaves out

Income taxes, for one. The mortgage interest and property tax deductions only help if you itemize, and the 2026 standard deduction is $16,100 for a single filer and $32,200 for a married couple filing jointly (IRS). On the other side, a gain on your main home is often tax-free up to $250,000, or $500,000 for a married couple filing jointly, if you owned it and lived in it for two of the five years before the sale (IRS), while the renter's investment gains may be taxed. On balance, leaving taxes out understates buying slightly for most households.

Selling costs are our assumption: 6% of the price for agent commissions, transfer taxes and the rest. Commissions are negotiable, and since August 17, 2024, offers to pay a buyer's agent can no longer be made through the multiple listing service (NAR). Ask agents what they charge, and check whether your state or city adds a transfer tax. Closing costs to buy use $6,700, close to the $6,684 median of lender and settlement charges on 2023 purchase loans (CFPB); prepaid interest, escrow deposits and transfer taxes come on top.

The model also grows prices and rents at steady rates, which real markets never do. A fall in prices in the years just after you buy can push the crossing point out by years, and a run of steep rent rises can bring it closer. Test the calculator with growth rates below and above the defaults, and treat a decision that only works under the rosier assumption as a decision that doesn't work.

If you decide to buy

Settle the budget before the house. Our home affordability calculator shows the price a lender's limit allows and a lower one that still leaves room to save. Then get at least three Loan Estimates on the same day: from your bank or credit union, an online lender, and a broker or marketplace such as LendingTree, which passes one application to several lenders at the price of calls and emails from all of them. Our guide to APR and interest rates shows how to compare them, and the mortgage rates page has this week's Freddie Mac average. If you decide to keep renting, the down payment belongs somewhere it earns a fair rate while you wait; our high-yield savings guide compares the options. We are not paid for any of these links today; if that changes, the links will be marked and the advice won't.

Questions people ask

Is it cheaper to rent or buy right now?

Month to month, renting is often cheaper at today's rates. In our example, owning a $400,000 home with 20% down at 7.24% costs $2,936 in the first month, against $2,400 to rent a comparable home. Over time the owner gains from the loan paydown and the home's growth, so buying pulls ahead in year 11 at that rent, and in year 5 if the same home rents for $2,800.

How long should you stay in a home for buying to make sense?

Long enough for the home's growth and loan paydown to repay the costs of buying and selling. In our example, that is 11 years at $2,400 rent, 7 years with a rate one point lower, and 16 years with 10% down instead of 20%. Under about five years, buying rarely wins unless rent for a comparable home is high relative to the price.

What is the price-to-rent ratio?

The home's price divided by a year's rent for a comparable home. Our example is $400,000 against $28,800 a year, a ratio of about 14. A lower ratio favors buying and a higher one favors renting, but the ratio ignores your mortgage rate, taxes and how long you stay, so treat it as a first screen.

Is rent just throwing money away?

No more than mortgage interest, property tax, insurance and upkeep are. In our example, those unrecoverable costs of owning plus the return the down payment could have earned come to about $3,039 in the first month, more than the $2,400 rent. What the owner gets back is the home's growth, which is uncertain and only arrives when they sell.

Does the mortgage interest deduction change the answer?

Only for households that itemize, and only by the amount their itemized deductions exceed the standard deduction, which for 2026 is $16,100 for a single filer and $32,200 for a married couple filing jointly. Many owners take the standard deduction, so we leave the deduction out of the examples.

This guide is educational and is not personalized financial, tax or legal advice. Figures are national averages and medians as of the dates given; your prices, rents and loan quotes will differ. Calculations assume a fixed-rate loan, steady growth in prices and rents, monthly compounding and no income taxes, in today's dollars without discounting.