Is it better to rent or buy? It depends most on how long you stay
Selling soon after you buy usually favors renting, because costs come first and gains come later. On these inputs, after 1 year the renter is $33,399 ahead, and buying doesn't catch up until year 7. Buying costs $12,600 at closing here, and selling costs 6% of the home's value, so a short stay has to cover both.
| Year | If you buy | If you rent | Ahead |
|---|---|---|---|
| 1 | $76,374 | $109,772 | Renting |
| 3 | $113,760 | $136,682 | Renting |
| 5 | $154,366 | $164,318 | Renting |
| 7 | $198,497 | $192,638 | Buying |
| 10 | $272,057 | $236,258 | Buying |
| 15 | $429,515 | $323,077 | Buying |
| 20 | $656,538 | $444,844 | Buying |
| 30 | $1,440,747 | $855,166 | Buying |
Both households start with the same cash. The renter invests what the buyer spends upfront, and each month whoever has the lower housing cost invests the difference. So neither side's spare money disappears from the comparison. That's the part a simple "rent is throwing money away" argument misses.
Why comparing rent to a mortgage payment misleads you
Rent should be compared with what owning costs and never comes back, which isn't the same as the mortgage payment. In year one the $2,124 loan payment grows to $3,023 a month with tax, insurance, and upkeep, against $2,420 for renting. But $3,756 of that year's payments goes to your own loan balance. The part you don't get back is about $32,516, or $2,710 a month. That's before counting any rise in the home's value, or what your down payment could have earned elsewhere.
There's an opposite trap as well. Owners face repairs that renters don't, and the 1% maintenance input is only a rule of thumb. The Consumer Financial Protection Bureau (CFPB) notes these costs can be significant and vary by home and climate. Also, enter rent for a home you'd actually accept as a substitute. Comparing a large house with a small apartment makes renting look better than it is.
Which assumption flips the answer?
Home appreciation and rent matter most. Change appreciation from 3.5% to 2% and the 10-year result moves from Buy by $35,799 to Rent by $30,360. No calculator can tell you those future numbers, so test a range rather than trust one result.
| Change | After 10 years | Buying pulls ahead |
|---|---|---|
| Starting inputs | Buy by $35,799 | Year 7 |
| Home appreciation 2% | Rent by $30,360 | Year 15 |
| Flat home prices | Rent by $105,299 | Year 24 |
| Investment return 5% | Buy by $70,076 | Year 5 |
| Investment return 9% | Rent by $4,421 | Year 12 |
| Rent $1,800 | Rent by $77,272 | Not within 30 years |
| Rent $3,000 | Buy by $148,870 | Year 3 |
| Mortgage rate 5.5% | Buy by $78,599 | Year 5 |
| Mortgage rate 7.5% | Rent by $7,848 | Year 12 |
Searching for a rent vs buy calculator for your city or ZIP code? The math is the same everywhere, and your local price, rent, and tax rate are what change it. The expensive-city preset uses a $900,000 home and $3,800 rent at 3% appreciation. Result after 10 years: rent by $197,896. Break-even: not within 30 years. High prices relative to rent favor renting. Use real listings near you.
Renting only wins if you really invest the difference
The opportunity cost of buying is what your down payment could have earned. This calculator counts it, but it also assumes the renter invests every spare dollar, every month, for years. If the renter invests the starting $96,600 and spends the monthly difference, the 10-year result falls from $236,258 to about $176,013. Part of owning's edge is behavior: a mortgage payment is forced saving, and a brokerage transfer is optional.
Be careful with the 7% return as well. It's an assumption held steady for decades, and real returns vary and can be negative. A home is also one asset in one place, with debt attached. Our investment calculator can model the renter's portfolio on its own.
The tax rules that can change the result
The calculator assumes your home sale gain is tax-free. That's the federal exclusion: up to $250,000 of gain, or $500,000 on a joint return, if you owned and lived in the home for 2 of the 5 years before the sale. It holds for this example at 10 years, with a $172,451 gain. At 30 years the gain reaches $758,853, past both limits, so the buying figure above runs high. Selling before 2 years can also mean tax on the gain.
It also leaves out the mortgage interest deduction, which only helps if you itemize. First-year interest here is $21,729. The 2026 standard deduction is $16,100 for single filers and $32,200 for joint filers. So a single buyer's interest tops it by $5,629, while a married couple would still be $10,471 short from interest alone. The real tax benefit can be small, so don't count the whole interest bill as a saving. A tax professional can run your case.
How to model roommates, rental income, or paying cash
- Roommates. Enter only your share of the rent. The tool has no field for a roommate's rent in a home you buy, so work that out separately.
- Rental income. The tool doesn't model a rental unit or a tenant. It's built for the home you'd live in.
- Paying cash, no mortgage. Set the down payment to 100%. The tool then compares your money in the home with the same money invested.
- Refinancing later. The rate stays fixed. Test a lower one with the mortgage rate input, but it won't include refinance costs.
This is a model built on assumptions you control, not a prediction. For the payment details, use the mortgage calculator, and to check the price fits your income, use the home affordability calculator. A HUD-approved housing counselor can walk through a real purchase with you at little or no cost.
Common questions
How long do I need to stay for buying to make sense?
There's no universal number. It's year 7 on these starting inputs, year 15 at 2% appreciation, and year 3 if rent is $3,000. If you might move within a few years, the costs of buying and selling are hard to recover.
Does this include PMI?
Yes. Below 20% down, the tool adds PMI at the rate you enter until the balance reaches 78% of the purchase price. With 5% down on this home, a 0.6% rate (an example) adds about $200 a month. Ask a lender for your actual rate, since it depends on your credit and down payment.
What investment return should I use?
Use one you can defend, then test lower and higher. The 7% starting value is an assumption, and so is the steady path. Try 5% and 9% to see how much the answer depends on it.
Why does the renter have so much money at first?
Because the renter keeps the $96,600 a buyer spends on the down payment and closing, and invests it. A buyer who sold right away would get the equity back, less selling costs. The closing costs are gone either way.
How does the calculator treat rising rent?
Rent grows by the percentage you enter, 3.5% a year to start. The mortgage payment stays fixed, but property tax and upkeep grow with the home's value, and insurance and HOA dues grow at their own rate. That's why owning tends to get cheaper relative to renting over time, as long as those inputs hold.
Sources
- Topic no. 701: Sale of your home · Internal Revenue Service
- Publication 936: Home Mortgage Interest Deduction · Internal Revenue Service
- Revenue Procedure 2025-32: 2026 inflation adjustments, including standard deductions · Internal Revenue Service
- Figure out how much you want to spend · Consumer Financial Protection Bureau
- Find a housing counselor · Consumer Financial Protection Bureau