The True Cost of Renting vs Buying
Buying beats renting only once you stay long enough to recover the upfront costs. On this page's example, a $420,000 home with 20% down at 6.95% against $2,200 rent, buying pulls ahead after about 5 years, or about 10 years once 6% selling costs are counted. Enter your own rent, price, rate and time horizon above to see your break-even year.
The rent vs buy decision is one of the most complex in personal finance: and the right answer depends heavily on how long you plan to stay, local price-to-rent ratios, and what you'd do with the money otherwise. Neither renting nor buying is universally better.
Buying builds equity and offers stability, but it also ties up capital in a down payment, costs 1 to 3% of home value per year in taxes and maintenance, and involves significant transaction costs (3 to 6% to buy, 6 to 10% to sell). Renting offers flexibility and preserves capital for investment: but rents rise over time and you build no equity.
The Break-Even Rule
Price-to-Rent Ratio
Down Payment Opportunity Cost
The Hidden Costs of Buying
What Buying Really Costs in Year One
Default example: $420,000 home, $84,000 down, 6.95% for 30 years, 1.2% property tax, $150 a month insurance, 1% maintenance, 3.5% appreciation, versus $2,200 rent plus $15 renter's insurance. Monthly averages over the first year.
| Item | Buying | Renting |
|---|---|---|
| Mortgage interest | $1,937 | $0 |
| Principal (you keep this as equity) | $287 | $0 |
| Property tax | $420 | $0 |
| Insurance | $150 | $15 |
| Maintenance | $350 | $0 |
| Rent | $0 | $2,200 |
| Cash out each month | $3,144 | $2,215 |
| Lost return on the $84,000 down payment at 7% | $490 | $0 |
| Appreciation at 3.5% | minus $1,225 | $0 |
| True monthly cost | $2,122 | $2,215 |
Buying costs $929 more in cash each month, yet its true cost is slightly lower, because principal and appreciation come back to you when you sell. That is why the result swings so hard on the appreciation you assume, and why the $12,600 of closing costs up front needs several years to earn back.
Break-Even Year Under Different Assumptions
Same example, changing only home appreciation and the return you would earn by investing the down payment instead. "Calculator" is the break-even year this tool shows. The second figure also deducts 6% selling costs from the sale price, which is closer to what you actually walk away with.
| Appreciation | 5% return, calculator | 5% return, with selling costs | 7% return, calculator | 7% return, with selling costs |
|---|---|---|---|---|
| 2% | Year 11 | Year 14 | Year 17 | Year 21 |
| 3% | Year 5 | Year 9 | Year 8 | Year 12 |
| 3.5% | Year 4 | Year 7 | Year 5 | Year 10 |
| 4% | Year 3 | Year 6 | Year 3 | Year 7 |
| 5% | Year 2 | Year 4 | Year 2 | Year 5 |
Rent level and the price-to-rent ratio
Keeping the $420,000 home and 3.5% appreciation fixed, the cheaper the rent, the longer buying takes to catch up.
| Monthly rent | Price-to-rent ratio | Calculator break-even |
|---|---|---|
| $1,600 | 21.9 | Year 18 |
| $1,800 | 19.4 | Year 12 |
| $2,000 | 17.5 | Year 8 |
| $2,200 | 15.9 | Year 5 |
| $2,500 | 14.0 | Year 3 |
| $2,800 | 12.5 | Year 2 |
This is the price-to-rent rule in numbers: under 15 buying wins fast, around 20 it takes more than a decade.
2026 Tax Rules That Change the Math
The 2026 standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly. Mortgage interest only saves tax if your itemized deductions beat those amounts. In the example, first-year interest is $23,244 and property tax is $5,040, a total of $28,284. A single buyer clears the standard deduction by $12,184 plus any state income tax. A married couple falls $3,916 short, so unless state tax and charity make up the gap, the mortgage gives them no federal tax break at all.
- Interest limit: interest is deductible on up to $750,000 of acquisition debt ($375,000 married filing separately). The One Big Beautiful Bill Act made that limit permanent.
- SALT cap: state and local taxes, including property tax, are deductible up to $40,400 in 2026, reduced for incomes above $505,000.
Leave tax savings out of the comparison unless you know you will itemize. The calculator does not include them, which keeps the result conservative for buyers.