Is it cheaper to rent or buy right now?
With the default assumptions, renting is cheaper over 7 years by about $48,139. That uses the 7.03% average 30-year fixed rate from Freddie Mac’s weekly survey (September 24, 2026). The first-year cost of owning is $3,010 a month, against $2,015 to rent, and buying pulls ahead in year 23. After 5 years renting leads by $45,748; after 10 years renting leads by $49,470.
Three things decide the answer for most households: how long you stay, how local rents compare with prices, and the mortgage rate compared with what your cash could earn invested. Home price growth matters too, but no one can predict it, so test a low and a high value.
How to use the rent vs. buy calculator
- Enter the monthly rent for a home like the one you would buy (same area, size and condition), not your current rent if it is a different kind of place.
- Enter the price, down payment, mortgage rate and loan term. Use a rate quote if you have one.
- Set how many years you expect to stay. This is the single biggest driver of the result.
- Review the assumptions under “Growth & investment return” and “Costs of owning”: home price growth, rent increases, investment return, property tax, insurance, maintenance and selling costs.
- Read the verdict, break-even year and break-even rent, then copy the link to save or share your scenario.
How the comparison works
The calculator follows two households month by month. Both start with the same cash and spend the same total each month; the only difference is where the money goes.
- At the start, the buyer pays the down payment plus closing costs. The renter invests that same amount instead.
- Every month, the owner pays principal and interest, PMI (with less than 20% down), property tax, insurance, HOA dues and maintenance; the renter pays rent and renters insurance. Whoever pays less invests the difference.
- Each year, rent rises by the rent increase, property tax follows the home’s value, and insurance, HOA and maintenance rise with inflation.
- At the end, the buyer sells: net worth is the home’s value minus the loan payoff and selling costs, plus any investments. The renter’s net worth is the investment account.
W_buy = V_N × (1 − s) − B_N + A_own
- V_N
- home value = price × (1 + appreciation)^years
- s
- selling costs as a share of the sale price
- B_N
- remaining mortgage balance
- A_own
- owner’s investments, from months when owning cost less than renting
W_rent = U × (1 + i)^N + Σ max(d_m, 0) × (1 + i)^(N − m)
- U
- down payment + buying closing costs
- d_m
- owner’s cost minus renter’s cost in month m
- i
- monthly investment return = (1 + annual return)^(1/12) − 1
- N
- months you stay = years × 12
Worked example
The buyer puts $80,000 down on a $400,000 home and pays $12,000 (3%) in closing costs, so the renter invests U = $92,000. In month one, owning costs $3,009.59 ($2,135.42 principal and interest, $333.33 property tax, $207.50 insurance and $333.33 maintenance) while renting costs $2,015.00. The renter invests the $994.59 difference.
After 7 years at 3% growth the home is worth $491,950. Subtracting the $291,808 loan balance and $29,517 of selling costs leaves the buyer with $170,625. The renter’s account, growing at 5%, reaches $218,765. Renting is ahead by $48,139, or $39,142 in today’s dollars.
What rent makes buying worth it?
The table shows the break-even rent: if a similar home rents for more than this today, buying comes out ahead over the stay shown. It uses the calculator’s default assumptions (20% down, 7.03% 30-year rate, 1% property tax, 1% maintenance, 3% price growth, 3% rent increases, 5% investment return), with insurance of $2,490 a year at every price.
| Home price | 3 years | 5 years | 7 years | 10 years | 15 years |
|---|---|---|---|---|---|
| $250,000 | $1,988 | $1,720 | $1,599 | $1,499 | $1,407 |
| $300,000 | $2,347 | $2,026 | $1,880 | $1,760 | $1,650 |
| $400,000 | $3,065 | $2,637 | $2,443 | $2,283 | $2,136 |
| $500,000 | $3,783 | $3,248 | $3,005 | $2,805 | $2,622 |
| $600,000 | $4,501 | $3,860 | $3,568 | $3,328 | $3,107 |
| $750,000 | $5,578 | $4,776 | $4,412 | $4,112 | $3,836 |
Longer stays lower the bar because the upfront and selling costs are spread over more years and more of each payment builds equity.
Which assumptions change the answer most?
Home price growth and the return on invested cash pull in opposite directions. Here is how the default $400,000 example changes after 7 years (positive numbers mean buying comes out ahead):
| Home price growth | 3% return | 5% return | 7% return |
|---|---|---|---|
| 1% a year | −$82,967 | −$105,456 | −$130,394 |
| 2% a year | −$55,124 | −$77,654 | −$102,634 |
| 3% a year | −$25,569 | −$48,139 | −$73,163 |
| 4% a year | +$5,786 | −$16,827 | −$41,894 |
| 5% a year | +$39,029 | +$16,373 | −$8,739 |
Our defaults are middle-of-the-road, not forecasts. NAR’s median existing-home price was $429,100 in August 2026, up 1.6% from a year earlier. S&P 500 stocks have returned about 10% a year from 1928 through 2025 (NYU Stern data), but with deep drops along the way, while top savings accounts pay about 4%; 5% reflects a mix. Consumer prices rose 2.5% a year on average from 1995 to 2025 (BLS CPI-U) and 3.4% in the latest 12 months, so we grow costs at 3%.
The price-to-rent ratio
The price-to-rent ratio divides a home’s price by a year of rent for a similar home. For the default example it is $400,000 ÷ ($2,000 × 12) = 16.7, meaning a year’s rent equals 6% of the price. The lower the ratio, the more attractive buying is. Using the break-even rent for a 7-year stay, our model needs a ratio of about 13.6 or lower before buying wins with today’s default assumptions.
Compare like with like: a three-bedroom house and a one-bedroom apartment in the same city will give very different ratios. The ratio also ignores how long you stay, which is why the full calculation above is more reliable.
The 5% rule of thumb
The 5% rule, popularized by Ben Felix in his video “Renting vs. Buying a Home: The 5% Rule,” estimates the yearly unrecoverable cost of owning as 5% of the home’s value: roughly 1% property tax, 1% maintenance and 3% cost of capital (mortgage interest and the return your down payment gives up). If similar rent is below that amount, renting is likely cheaper.
Break-even monthly rent ≈ 0.05 × home price ÷ 12
For a $400,000 home, that is 0.05 × $400,000 ÷ 12 = $1,667 a month. The month-by-month model puts the break-even rent for a 7-year stay at $2,443. The gap comes from what the rule leaves out: closing and selling costs of 9% of the price, and a cost of capital that rises with mortgage rates. Treat the 5% rule as a first screen, not an answer.
Hidden costs of owning a home
The mortgage payment is only part of the bill. In the default example, owning also involves:
- Closing costs: $12,000 at 3% of the price. The CFPB says closing costs typically run 2% to 5% of the purchase price.
- Mortgage interest: $22,393 in year one; early payments are mostly interest.
- Property tax: $4,000 a year at 1%, rising as the home gains value. Rates vary widely by state and county.
- Maintenance and repairs: $4,000 a year at 1%. Roofs, HVAC systems and water heaters wear out on their own schedule.
- Homeowners insurance: $2,490 a year, versus the $180 renters policy assumed for the renter.
- Opportunity cost: the $92,000 paid upfront could have earned about $4,600 in a year at 5%.
- Selling costs: $29,517 after 7 years at 6% of the sale price, covering agent commissions (which are negotiable), transfer taxes and other seller fees.
- HOA dues, PMI and special assessments where they apply.
Unrecoverable owning costs in year one come to about $37,483 ($3,124 a month) before any appreciation, versus $24,180 of rent and renters insurance. See the full payment breakdown in our mortgage calculator.
When renting wins, and when buying wins
Renting tends to come out ahead when:
- You may move within a few years, before appreciation and loan paydown cover the 9% it costs to buy and sell.
- Homes are expensive relative to rents (a high price-to-rent ratio).
- Mortgage rates are high compared with what you could earn on your cash.
- You actually invest the down payment and any monthly savings. Renting only builds wealth if the difference is saved.
Buying tends to come out ahead when:
- You plan to stay a long time; the principal and interest on a fixed-rate loan stay level while rent keeps rising.
- Rents are high relative to prices, or rising quickly in your area.
- You value the forced savings of paying down a mortgage and the stability of controlling your home.
Money is not the whole decision. Flexibility, school districts, the freedom to renovate and the hassle of repairs all count. Check how much you can borrow with the house affordability calculator, and see what investing the difference could grow to with the investment calculator.
Why income taxes are left out
Mortgage interest and property tax are deductible only if you itemize, and most households take the standard deduction instead: 88.5% of federal returns for tax year 2022 did, according to IRS Statistics of Income. For 2026 the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly. In the default example, year-one mortgage interest plus property tax total $26,393; only the amount by which all your itemized deductions exceed the standard deduction lowers your taxable income. Interest is deductible on up to $750,000 of mortgage debt taken out after December 15, 2017 ($375,000 if married filing separately), and state and local taxes, including property tax, are capped at $40,400 for most filers in 2026.
Taxes on gains also tend to favor owners. When you sell your main home, you can exclude up to $250,000 of gain ($500,000 for married couples filing jointly) if you owned and lived in it for at least two of the previous five years. A renter’s investment gains, by contrast, may be taxed. To reflect that, enter an after-tax investment return.
Frequently asked questions
Is it better to rent or buy a house?
It depends mostly on how long you stay, local prices versus rents, and mortgage rates. In our default example (a $400,000 home that rents for $2,000 a month, 20% down at 7.03%), renting comes out $48,139 ahead after 7 years, and buying pulls ahead in year 23. Enter your own rent, price and plans to see which wins for you.
How long do you need to stay in a house for buying to beat renting?
Long enough for appreciation and loan paydown to cover the upfront and exit costs. Buying and selling cost 9% of the price in our default assumptions (3% to buy, 6% to sell), so a short stay rarely pays off. With the defaults, buying pulls ahead in year 23. Higher rents, faster price growth or lower mortgage rates shorten that time.
What is the 5% rule for renting vs. buying?
The 5% rule is a quick estimate of the yearly unrecoverable cost of owning: about 1% for property tax, 1% for maintenance and 3% for the cost of capital, or 5% of the home’s value. Divide by 12 to get a break-even rent. For a $400,000 home that is $1,667 a month. If you can rent a similar home for less, renting is likely the better financial deal.
What is a good price-to-rent ratio?
Lower is better for buying. The price-to-rent ratio is the home price divided by a year of rent for a similar home, and the 5% rule implies a break-even ratio of 20. With today’s default assumptions, our full model needs a ratio of about 13.6 or lower for buying to win over 7 years, because mortgage rates and transaction costs raise the cost of owning.
Is paying rent throwing money away?
No. Rent buys housing, and owners have unrecoverable costs too. In the default example, year-one mortgage interest, property tax, insurance, maintenance and the $4,600 the upfront cash could have earned add up to $37,483, or $3,124 a month, versus $2,000 in rent. Appreciation of about $12,000 a year offsets part of that for the owner.
Does the calculator include the mortgage interest deduction?
No. Mortgage interest and property tax only reduce your taxes if you itemize, and most filers don’t: 88.5% of 2022 federal returns claimed the standard deduction, according to IRS data. For 2026 the standard deduction is $16,100 for single filers and $32,200 for married couples filing jointly. If you will itemize, buying looks somewhat better than the calculator shows.
What home appreciation rate should I use?
Use a modest long-term figure rather than recent peaks. Our default is 3% a year; the table on this page shows how much the answer changes between 1% and 5%. You can check your area’s history in the Federal Housing Finance Agency’s House Price Index, which covers states, metro areas and ZIP codes. Remember that prices can also fall.