Buying a home isn't automatically better than renting. Buyers pay closing costs, property tax, insurance and upkeep, and with mortgage rates around 7% in late 2026, much of the early payments is interest.
A fair comparison assumes the renter invests what they don't spend. Here's how that works out.
How the comparison works
- Both people start with the same cash: the down payment plus closing costs. The renter invests it.
- Each year, the buyer pays the mortgage, property tax, insurance, HOA and maintenance; the renter pays rent. Whoever spends less invests the difference.
- At the end, the buyer's wealth is the home's value after selling costs, minus the loan left, plus any investments. The renter's is their investments.
Worked example
Example: $400,000 home vs $2,200 rent
20% down, 7.18% for 30 years: $2,168 principal and interest, about $3,018 a month all-in at first.
Home prices rising 3.5% a year, rent 3%, investments earning 6%.
After 10 years renting is about $11,000 ahead. Buying pulls ahead in year 13 and is about $69,000 ahead after 20 years.
At a 6% mortgage rate, buying would pull ahead in year 6.
The answer swings on how long you stay, how fast prices and rents rise, and your mortgage rate. See the full monthly payment with the mortgage calculator.
How to use this calculator
- Enter the home price, down payment, mortgage rate and owning costs.
- Enter the rent for a similar home and how fast it rises.
- Set how much you'd earn on money not spent, and how long you'll stay.
FAQs
Is it cheaper to rent or buy in 2026?
With 30-year mortgage rates around 7%, renting often stays cheaper for longer than it did a few years ago. The answer depends on how long you stay and local rent-to-price ratios.
How long should I stay to make buying worth it?
Long enough for appreciation and paying down the loan to cover buying and selling costs: often 5 to 10 years, longer when rates are high.
What's the 5% rule?
A rough guide: if yearly rent is less than about 5% of the home's price, renting may be cheaper. $2,200 a month is 6.6% of $400,000.
Does this include the mortgage interest deduction?
No. Since the standard deduction rose, most homeowners don't itemize, so it often makes no difference.
Sources
Results are estimates and aren't tax, legal or financial advice. For your own return, check with a CPA or enrolled agent. Spotted a mistake? Tell us.