Rent vs. buy: the question is how long
At the current 30-year rate of 6.66%, owning a median-priced U.S. home at $410,700 with 20% down runs about $2,980 a month before you count the $36,963 it costs to buy and later sell it. Whether that beats renting is almost entirely a question of how many years you stay — not of whether rent is “throwing money away.”
This calculator simulates both paths month by month and compares them the only way that is honest: net worth if you liquidated on the same date. The buyer sells and pays the cost of selling. The renter cashes out a portfolio that started with the same money the buyer used for the down payment and closing costs, and grew by every dollar the cheaper path saved along the way. That symmetry — opportunity cost running in both directions — is what most rent-vs-buy tools quietly leave out.
Rent versus buy calculator
The two options
What a comparable home rents for in the same area.
The single input that changes the answer most.
Assumptions
What the cash you didn't tie up in a down payment earns instead. This is the opportunity cost.
Percent of home value per year. 1% is the common planning figure.
Commission, transfer taxes, title, concessions. This is what makes short holds lose.
After 10 years
Renting is ahead by $88,734
That is the difference in net worth if you sold the house (or cashed out the portfolio) at the end of year 10, after paying 6.0% to sell.
Break-even
Buying never catches renting inside 10 years at these inputs. The down payment earning 7.0% elsewhere, plus the 6.0% cost to sell, is more than the equity and appreciation you accumulate. Lengthen the horizon, raise appreciation, or lower the price to find the crossing point.
Cash to buy
$94,461
$82,140 down + $12,321 closing
Month 1 cost to own
$2,980
P&I, tax, insurance, maintenance
Rent paid over the period
$278,896
Grows at the rate you set
Cash out of pocket to own
$466,056
Including the upfront cash
Interest paid
$204,459
Never recovered
Principal repaid
$48,911
Converted to equity
Home value at the end
$551,946
At 3.0%/yr
Cost to sell it
$33,117
6.0% of sale price
Net worth, year by year
| Year | If you buy | If you rent | Difference |
|---|---|---|---|
| 1 | $72,642 | $113,222 | −$40,580 |
| 2 | $88,378 | $132,856 | −$44,478 |
| 3 | $104,734 | $153,412 | −$48,678 |
| 4 | $121,737 | $174,942 | −$53,205 |
| 5 | $139,419 | $197,501 | −$58,082 |
| 6 | $157,811 | $221,147 | −$63,336 |
| 7 | $176,946 | $245,943 | −$68,997 |
| 8 | $196,861 | $271,955 | −$75,094 |
| 9 | $217,593 | $299,254 | −$81,661 |
| 10 | $239,180 | $327,914 | −$88,734 |
Both columns assume you liquidate at that point: the buyer sells and pays 6.0%, the renter cashes out the portfolio. Investment gains are shown before capital-gains tax; the sale of a primary residence is usually exempt up to the federal exclusion, so the two are not taxed alike.
How the comparison works
Comparing rent to a mortgage payment is not a comparison. Part of a mortgage payment builds equity and part of it is pure cost; rent is all cost but frees up capital and carries no transaction bill on the way out. The only fair test is to run both paths for the same number of months and ask who is worth more at the end.
Step 1 — the same starting cash
Both paths begin with the down payment plus closing costs in hand. The buyer converts it into a house and a set of fees. The renter invests it. From that first month the models are directly comparable.
Step 2 — the monthly cost of owning
own(m) = P&I + tax(m) + insurance + maintenance(m) + PMI(m) P&I = L × [ i(1+i)ⁿ ] ÷ [ (1+i)ⁿ − 1 ] fixed, 30-year term tax(m) = home value(m) × annual tax rate ÷ 12 maintenance = home value(m) × 1% ÷ 12 PMI(m) = balance(m) × 0.5% ÷ 12, until balance < 80% of purchase price rent(m) = rent(m−1) × (1 + rent growth)^(1/12)
Tax and maintenance track the home’s current value rather than the purchase price, because both do in reality. Rent compounds monthly at the annual growth rate you set. The mortgage is amortised over its actual 30-year term regardless of how long you plan to stay — a distinction that sounds pedantic and is not: it is the difference between a realistic payment and a nonsensical one.
Step 3 — invest the difference, both ways
Each month, whichever path costs less puts the difference into an investment account earning the return you set. Early on that is almost always the renter, since owning usually costs more per month than renting the same home. Later, as rent compounds past a fixed mortgage payment, it flips and the owner starts banking the difference. Both balances compound monthly.
Step 4 — liquidate and compare
buy net worth(m) = home value(m) × (1 − cost to sell) − loan balance(m) + buyer's investments(m) rent net worth(m) = renter's investments(m) break-even = first m where buy net worth(m) ≥ rent net worth(m)
The cost to sell is applied to the full sale price, not to the equity — a 6% commission on a home you are 15% equity into consumes far more than 6% of your position. That single line is why the break-even year is where it is, and it is the line most calculators omit. The full write-up sits on our methodology page.
A worked example at today’s numbers
The U.S. median-priced home against $2,000 a month in rent, 20% down, at the current survey rate. Both the price and the rate are read from our economic indicator series when this page is generated.
| U.S. median sale price | $410,700 |
| Down payment, 20% | $82,140 |
| Closing costs to buy, 3% | $12,321 |
| Cash needed up front | $94,461 |
| Loan amount | $328,560 |
| Principal & interest at 6.66% | $2,111/mo |
| Property tax at 1.1%/yr | $376/mo |
| Insurance at $1,800/yr | $150/mo |
| Maintenance at 1%/yr | $342/mo |
| Month-one cost to own | $2,980/mo |
| Month-one cost to rent | $2,000/mo |
Price: U.S. median sale price of houses sold (MSPUS), Census Bureau and HUD via FRED, Q2 2026. Published quarterly.Rate: Freddie Mac via FRED, August 2026
Owning costs about $980 more per month than renting in month one, and the buyer has also handed over $94,461 that is no longer earning anything in a brokerage account. Against that, the buyer begins converting part of each payment into equity, the payment is fixed while the rent is not, and the asset itself may appreciate.
Then there is the exit. Selling at 6% costs about $24,642 at today’s price, on top of the 3% paid to buy. At 3% annual appreciation, a home at this price gains roughly $12,321 in its first year — so the round trip alone takes about 3.0 years of appreciation to recover before a single dollar of gain is yours. That, not the monthly comparison, is why the standard advice is to buy only if you expect to stay five years or more.
As a fast cross-check, the price-to-rent ratio here is 17.1 — at that level buying and renting land close enough together that the decision turns on how long you stay and your down payment. Run your own city’s numbers in the tool above; a ratio of 11 in the Midwest and a ratio of 28 on the coast produce genuinely different answers from identical incomes.
What this model assumes, and where it breaks
Appreciation and investment returns are smooth annual rates.
Neither housing nor equities move in a straight line. A model that compounds 3% a month by month tells you the average outcome, not the one you will get — and sequence matters enormously when your holding period is short. A buyer who sells into a 2008 or a 2022 does not get the average. Treat the break-even year as the centre of a wide distribution.
The mortgage interest deduction is not modelled.
Since the standard deduction was roughly doubled, most filers get no marginal benefit from deducting mortgage interest, so including it would overstate the case for buying for the majority of users. If you itemise — usually a large loan in a high-tax state — your real break-even arrives earlier than shown.
Taxes on the two paths are not treated alike.
Investment gains are shown before capital-gains tax. Gain on the sale of a primary residence is usually exempt up to the federal exclusion. The renter's portfolio is therefore flattered slightly relative to the home.
Property tax tracks home value; insurance is held flat.
Assessment practice varies enormously — some states cap annual increases, others reassess to market on sale. Insurance premiums have in fact been rising faster than inflation in wind, wildfire and flood-exposed markets, so holding the premium flat understates the cost of owning in those places. Flood insurance is separate and not modelled at all.
HOA dues and special assessments are excluded.
Not modelled anywhere in this tool. If you are comparing a condo to a rental, add the monthly dues to the cost of owning before reading the result, and remember that special assessments for structural work are not in any monthly figure.
Renting is treated as pure cost with no frictions.
No security deposit, no renter's insurance, no moving costs between leases, and no forced move when a landlord sells. Those are real and they favour buying. Conversely the model gives owning no credit for the security of a fixed payment, and charges renting nothing for the risk of a landlord raising the rent beyond the growth rate you set.
It cannot price the non-financial part.
Whether you can repaint the kitchen, how tied you are to a school catchment, whether a job might move you in three years. The financial answer is only one input, and for a short horizon it is usually the smaller one.
Common questions
What is the break-even point in a rent-vs-buy comparison?
The month at which the net worth of the buying path first equals the net worth of the renting path, assuming you liquidate on that date: the buyer sells the home and pays the cost of selling, the renter cashes out the portfolio. Before the break-even, renting has produced more wealth; after it, buying has. The number is not a constant — it moves with the price-to-rent ratio, the mortgage rate, how fast rents rise, what the invested down payment earns, and above all the cost to sell. There is no reliable rule of thumb here, and there may be no crossing at all: at a high price-to-rent ratio, with equities assumed to outrun home appreciation and a round trip of roughly 9% to buy and sell, the renting path can stay ahead indefinitely. Run your own numbers above rather than trusting a range.
Why does the down payment count as a cost of buying?
Because it is money that would otherwise be doing something. If you rent instead of buying, that cash stays invested and compounds. Ignoring that is the single most common error in rent-vs-buy comparisons and it is not a small one: at a 7% return, a $100,000 down payment left invested becomes roughly $197,000 in ten years. A model that treats the down payment as free will tell you buying wins years earlier than it does. This calculator starts both paths with the same cash and invests whatever the other path does not spend, in both directions.
Why does the cost to sell matter so much?
Because it is charged on the whole value of the home, not on your equity. Buying costs roughly 2% to 5% of the price in closing costs and selling costs roughly 5% to 8% in commission, transfer taxes, title and concessions. On a $410,700 home that round trip is about $36,963 — which at 3% appreciation takes roughly the first two and a half years of price growth just to recover. That transaction cost is the reason a short hold loses even in a rising market.
What is the price-to-rent ratio and how do I use it?
It is the purchase price divided by a year of rent for a comparable home. At the current U.S. median sale price of $410,700 against $2,000 a month, the ratio is about 17.1 — meaning buying and renting land close enough together that the decision turns on how long you stay and your down payment. Under 15 generally favours buying on monthly cost alone; over 20 generally favours renting unless you stay long enough for appreciation to close the gap. It is a fast screen, not an answer: it ignores the rate, the down payment and how long you will stay, all of which this calculator models.
Does the calculator account for the mortgage interest deduction?
No, and that is deliberate. Since the standard deduction was roughly doubled, the large majority of filers take it and get no marginal benefit from deducting mortgage interest at all. Modelling a deduction most users will never claim would systematically overstate the case for buying. If you do itemise — typically a large loan in a high-tax state — the true break-even arrives somewhat earlier than this page shows. The same applies to the capital-gains exclusion on a primary residence, which is real but only matters at sale.
Where to go next
The other two calculators
- Affordability calculator — the price your income and debts actually support, before you compare it to rent.
- Mortgage calculator — the full payment and the amortisation schedule behind the equity in this model.
How we get these numbers
- Methodology — every formula and assumption, including this model.
- Data sources — each provider and how current it is.
- All markets — prices and rents by state and city.
Get the local price-to-rent ratio
This comparison turns on local prices and local rents, and those diverge more than almost any other pair of numbers in housing. Each city page carries both:
If the answer is buy, the rate decides how much you overpay
Every scenario on this page is driven by the rate, and the rate is driven by your credit file. Tell us your timeline and we'll send what to fix before you apply — the specific items that move a mortgage credit tier, and how long each takes to clear.