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Rent vs. Buy Calculator 2026 — Which Builds More Wealth for You?

The decision to buy a home or keep renting is one of the most critical personal finance questions in America. For generations, the conventional wisdom stated that "renting is throwing money away." However, in modern housing markets characterized by fluctuating mortgage rates, high property taxes, and robust stock market returns, the financial reality is considerably more nuanced.
When you buy a home, you incur substantial unrecoverable costs: mortgage interest, property taxes, homeowners insurance, maintenance repairs, and selling commissions (typically 6% of the home value). Conversely, when you rent, you free up the upfront down payment and closing costs to compound in tax-advantaged index funds or high-yield investments. Whether buying builds more wealth depends fundamentally on one variable: your time horizon.
Our interactive Rent vs. Buy Calculator models the true long-term financial trajectories of both pathways. Compare monthly cash flows, property appreciation, mortgage equity accumulation, and the opportunity cost of investing your capital in the S&P 500 to determine your exact break-even year.

Rent vs. Buy Housing Comparison

Compare long-term net wealth, equity accumulation, and investment opportunity costs.

Time Horizon in Home
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Renting Builds $34,826 More Wealth Over 7 Years

High mortgage rates, selling commissions, and stock market returns favor renting over a 7-year horizon.

7-Year Outcome
Net Wealth Advantage
$34,826
In favor of Renting & Investing
Buyer Net Equity (Year 7)
$189,045
Home value ($508,912) minus loan & selling fees
Renter Portfolio (Year 7)
$223,871
$92,000 initial down payment invested at 7% APY
Year 1 Monthly Outflow
$2,881 vs $2,115
Buying costs $766/mo more in Year 1

Year-by-Year Net Wealth Trajectory

Watch equity accumulate through mortgage principal paydown and home appreciation versus renter index fund growth.

YearProjected Home ValueBuyer Net EquityRenter PortfolioNet Advantage
Year 1$414,000$72,737$108,328Renter +$35,591
Year 2$428,490$90,174$125,415Renter +$35,242
Year 3$443,487$108,343$143,305Renter +$34,962
Year 4$459,009$127,278$162,044Renter +$34,766
Year 5$475,075$147,015$181,683Renter +$34,668
Year 6$491,702$167,591$202,273Renter +$34,682
Year 7Target$508,912$189,045$223,871Renter +$34,826
Related Calculators for Better Decisions
Buying a home? Calculate your exact monthly payment with taxes & PMISaving for a house? See how much down payment you actually needInvesting in real estate? Calculate your cap rate & cash flowWant to see compound interest in action? Project your returns

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When to Use This Calculator

Everyday financial situations where this tool gives you fast, accurate clarity:

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Find Your Break-Even Year

Discover the exact year when the wealth created by homeownership overtakes renting and investing in stocks.

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Model Stock Market Opportunity Cost

Account for the returns you could earn by investing your down payment and monthly savings in the S&P 500 instead.

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Include Hidden Homeownership Costs

Factor in unrecoverable expenses like property taxes, homeowners insurance, HOA dues, and annual maintenance.

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Evaluate Relocation Timelines

Determine if staying in an area for 3, 5, or 10 years makes purchasing financially viable given transaction fees.

lightbulbFormula & Worked Example

How It Works

Our simulation evaluates the net wealth accumulated under both pathways across your chosen time horizon (n years):
  • Buying Wealth Model:

    • - Initial Investment: Down Payment + Buyer Closing Costs (typically 3% of purchase price)
    - Monthly Outflow: Mortgage P&I + Property Taxes + Homeowners Insurance + Maintenance (typically 1%/year)
    - Home Appreciation: Home Value compounded annually at the expected appreciation rate
    - Mortgage Paydown: Loan principal reduced according to standard 30-year amortization
    - Exit Selling Costs: 6% deduction for realtor commissions and transfer fees upon sale
    - Buyer Net Wealth = (Final Home Value − Remaining Mortgage Balance − Selling Costs)
  • Renting Wealth Model:

    • - Initial Investment: Down payment and closing costs are invested immediately into a diversified investment portfolio (e.g., S&P 500 at 7% expected annual return)
    - Monthly Outflows: Rent (escalated by annual rent inflation) + Renters Insurance
    - Monthly Difference Reinvestment: If buying costs more per month than renting, the monthly savings are added to the renter's investment portfolio; if renting costs more, the difference is deducted
    - Renter Net Wealth = Final Balance of Investment Portfolio
  • Break-Even Year:

    • The year at which cumulative Buyer Net Wealth first surpasses Renter Net Wealth.

    Step-by-Step Example

    Consider comparing a $400,000 home purchase (with a 20% down payment of $80,000 at a 6.50% mortgage rate) against renting an equivalent apartment for $2,100/month over a 7-year horizon:
    - Year 1 Cash Flow:
    - Buyer pays $2,022 (mortgage P&I) + $400 (property taxes) + $125 (insurance) + $333 (maintenance) = $2,880/month.
    - Renter pays $2,100 + $15 (renters insurance) = $2,115/month.
    - Buying costs $765/month more in out-of-pocket cash flow during Year 1.
    - Year 7 Net Wealth Outcome:
    - At 3.5% annual appreciation, the home is worth $509,000. After paying off $38,000 in loan principal and deducting 6% ($30,500) in selling fees, the buyer has $196,500 in net home equity.
    - Meanwhile, the renter invested the initial $92,000 cash plus monthly savings at 7.0% return, building a portfolio of approximately $148,000.
    - Verdict: Buying builds roughly $48,500 more net wealth after 7 years, with the financial break-even occurring around Year 4.3.

    Frequently Asked Questions

    In most US housing markets, the financial break-even point occurs between 4 and 7 years. Because buying a home incurs high upfront closing costs (2% to 5%) and selling commissions (5% to 6%), homeowners who move within 1 to 3 years almost always lose money compared to renting. If you plan to remain in the property for at least 5 to 7 years, appreciation and mortgage principal paydown usually make buying the more lucrative choice.
    No. While rent does not build property equity, it purchases flexibility, liquidity, and freedom from unrecoverable expenses. Homeowners also pay significant "unrecoverable costs" that do not build equity, including mortgage interest, property taxes, homeowners insurance, and maintenance repairs. Furthermore, renters who diligently invest their down payment savings in diversified index funds can build substantial long-term wealth.
    The 5% rule (popularized by portfolio manager Ben Felix) is a back-of-the-envelope heuristic for comparing housing costs. It states that the unrecoverable annual cost of homeownership is roughly 5% of the property value: ~3% for mortgage interest / cost of capital, ~1% for property taxes, and ~1% for maintenance. If you can rent an equivalent home for less than 5% of the purchase price divided by 12, renting is generally mathematically superior.
    Property taxes (typically 0.8% to 2.2% of assessed value annually depending on your state) and ongoing maintenance (traditionally budgeted at 1% of home value per year for roofs, HVAC, and plumbing) represent pure cash outflows that never build equity. In high-tax states like New Jersey, Illinois, or Texas, these recurring expenses push the break-even timeline further out.
    For most Americans, no. Since the Tax Cuts and Jobs Act substantially increased the standard deduction ($14,600 for single filers, $29,200 for married couples filing jointly), approximately 90% of US taxpayers now take the standard deduction rather than itemizing mortgage interest deductions. Unless your mortgage interest, state/local taxes, and charitable gifts exceed the high standard deduction threshold, the mortgage deduction provides zero additional tax savings.
    Elevated mortgage rates dramatically increase monthly interest payments, shifting the financial advantage toward renting in the short and medium term. When mortgage rates exceed 6.5%, the monthly payment on a median home is often 30% to 50% higher than renting an equivalent property. In this environment, renting and investing the monthly cash difference into index funds can outperform buying unless home prices experience rapid appreciation.

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