At today’s rates, buying usually beats renting only if you stay put for years. In our example, a $400,000 home with 10% down at 7.32% costs about $3,490 a month to own in the first year, including taxes, insurance, PMI and maintenance. Compared with renting a similar place for $2,400, buying comes out ahead only after about 14 years. At $2,800 rent, it takes about 7 years, and at $3,200, about 4.
The answer depends mostly on three things: how long you’ll stay, how much a similar rental costs, and how fast home prices and rents rise. Here’s how to run the comparison for your own situation.
Key takeaways
- Owning costs more than the mortgage payment: add taxes, insurance, PMI, maintenance, and buying and selling costs.
- Renting wins in the short run because buying and selling a home costs 8% to 10% of its price in total.
- The longer you stay, the more equity and price growth tip the math toward buying.
- A price-to-rent ratio above about 20 usually favors renting; below about 15 usually favors buying.
In this guide: Break-even by rent · Assumptions · The 5% rule · Price-to-rent ratio · Beyond the numbers · FAQ
When buying beats renting
We compared a buyer and a renter over time. The buyer’s wealth is the home’s value after selling costs, minus the loan balance. The renter’s wealth is the down payment and closing costs invested instead, plus every month’s difference between owning and renting costs, invested at 5% a year.
| Monthly rent for a similar home | Buying pulls ahead after | Buyer’s wealth after 10 years | Renter’s wealth after 10 years |
|---|---|---|---|
| $2,000 | Not within 30 years | $194,102 | $289,327 |
| $2,400 | 14 years | $194,102 | $218,981 |
| $2,800 | 7 years | $194,102 | $148,635 |
| $3,200 | 4 years | $194,102 | $78,289 |
Home price growth matters just as much. At $2,400 rent, buying pulls ahead after 21 years if prices rise 2% a year, but after 8 years if they rise 4%.
Our assumptions
| Assumption | Value |
|---|---|
| Home price | $400,000 |
| Down payment | 10% ($40,000) |
| Mortgage | 30-year fixed at 7.32% (Freddie Mac average, Oct 22, 2026) |
| Property tax | 1% of the price, rising 2% a year |
| Homeowners insurance | $2,450 a year, rising 3% a year |
| PMI | 0.5% of the loan a year, until the balance reaches 78% of the price |
| Maintenance | 1% of the home’s value a year |
| Closing costs to buy | 3% of the price |
| Selling costs | 6% of the sale price |
| Home price and rent growth | 3% a year |
| Return on the renter’s investments | 5% a year |
Not included: mortgage interest and property tax deductions, which help only if you itemize, renters insurance differences beyond about $15 a month, and HOA dues. To see the monthly cost of owning in more detail, use our mortgage payment calculator.
Can You Afford to Buy? Check Your Budget
Full guide: how much house can I afford calculator
Includes property tax, homeowners insurance, PMI or FHA mortgage insurance, and HOA dues.
The 5% rule for renting vs. buying
A quick shortcut: multiply the home’s price by 5% and divide by 12. If you can rent a similar home for less than that, renting is likely cheaper. The 5% stands for about 1% property tax, 1% maintenance and 3% cost of money.
For a $400,000 home, that’s about $1,667 a month. But with mortgage rates above 7%, the cost of money is higher than 3%, so many people now use 6% or 7%, which works out to $2,000 to $2,333 here. That’s consistent with our detailed example, where renting stays cheaper for a long time at $2,400.
The price-to-rent ratio
Divide the home price by a year of rent for a similar home. In our example, $400,000 ÷ ($2,400 × 12) = 13.9.
| Price-to-rent ratio | What it suggests |
|---|---|
| Under 15 | Buying is often favorable if you’ll stay several years |
| 15 to 20 | It depends on how long you stay and your down payment |
| Over 20 | Renting is often cheaper; common in expensive coastal cities |
A ratio of 13.9 looks favorable for buying, yet our break-even is 14 years. That’s because today’s high rates and buying and selling costs push the break-even out. Use the ratio as a first filter, then run the full numbers.
Beyond the numbers
Reasons to buy: a stable fixed payment while rents rise, forced savings through principal payments, freedom to renovate, and stability for school-age kids. Once you’ve paid off the loan, you live almost cost-free except for taxes, insurance and upkeep.
Reasons to rent: flexibility to move for work, no surprise repair bills, lower upfront cash, and the chance to keep savings invested. Renting is also smart while you rebuild credit or save for a bigger down payment.
If you lean toward buying, our first-time home buyer guide shows how to get in with less money down, and our down payment guide shows how the down payment changes your monthly cost.
Frequently asked questions
Is renting throwing money away?
No. Rent buys housing, flexibility and freedom from repairs. Owners also have costs they never get back: interest, taxes, insurance, maintenance and transaction costs. The question is which unrecoverable costs are lower for you.
How long do you need to stay to make buying worth it?
At today’s rates, often 5 to 10 years or more, depending on local rents and price growth. In areas where rent is high compared with prices, it can be as short as 3 or 4 years.
Will buying get cheaper if rates drop?
Lower rates reduce the monthly cost and shorten the break-even. Each 1-point drop in the rate lowers the payment on a $360,000 loan by about $240 a month. You can refinance later if rates fall, but home prices may rise in the meantime.
Should I buy if I might move in three years?
Usually not. Buying and selling costs alone add up to about 9% of the price, which three years of price growth and principal payments rarely cover.
The bottom line
Buying wins over the long run in most of the U.S., but at today’s rates the long run is longer than it used to be. Compare the full cost of owning with a similar rental, and buy when you expect to stay well past your break-even point.
Estimates only. HomeAffordLab is not a lender and does not provide financial advice. This page may contain ads. See our Advertising Disclosure.
Sources: Freddie Mac Primary Mortgage Market Survey, Oct 22, 2026 · HomeAffordLab rent vs. buy model (assumptions listed above) · Homeowners Protection Act (PMI cancellation at 78% LTV)