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Points Frog guide

Is it better to rent or buy?

Compare buying a home with renting a similar one and investing what you save. Enter the price, the rent and how long you'd stay to see each path's net worth year by year and when buying breaks even. At 7.4%, a $400,000 home that rents for $2,000 a month costs $3,016 a month to own in the first year.

Rent vs buy calculator

What you'd pay for the home.

Under 20% adds mortgage insurance.

For a similar home nearby.

7.4% was the 30-year average on October 15, 2026.

10 years
Home prices, taxes and the costs of owning

A year. US prices rose 4.3% a year since 1991.

Of value a year. US average 0.9%.

Of value a year. US average about 0.5%.

Of value a year. Budget 1% to 3%.

A month.

Of the price. Usually 2% to 5%.

Of the sale price, with agent fees.

Rent growth and investing

A year. US rents rose 3.3% a year since 1991.

A month. About $14 on average.

A year, on what the renter invests.

Long-run returns, 1928 to 2025:

Renting comes out ahead over 10 years

After 10 years, buying leaves you $283,520 once the home is sold, and renting while investing the difference leaves you $366,951: $83,431 more by renting. Buying doesn't pull ahead within 30 years.

Over 10 years, buying wins if your investments would earn less than 4.9% a year, or if a similar home rents for more than $2,401 a month.

Owning, first month

Mortgage principal and interest
$2,216
Property tax
$300
Home insurance
$167
Maintenance
$333
Total
$3,016

Renting, first month

Rent and insurance
$2,014
Renter invests
$1,002
Buying, after 10 years
$283,520
Home equity after selling costs, plus savings
Renting, after 10 years
$366,951
The down payment and monthly savings, invested
Break-even
None
Buying doesn't pull ahead within 30 years
Price-to-rent ratio
16.7
The price divided by a year's rent
Net worth from each path, by year · if you moved out thenBuyingRenting
Year-by-year table
YearHome equityBuyingRentingAhead
0$80,000$48,000$92,000Rent +$44,000
1$100,208$66,832$112,298Rent +$45,466
2$121,386$86,575$133,890Rent +$47,315
3$143,583$107,275$156,874Rent +$49,599
4$166,852$128,983$181,359Rent +$52,376
5$191,247$151,750$207,458Rent +$55,708
6$216,827$175,631$235,298Rent +$59,667
7$243,653$200,686$265,015Rent +$64,329
8$271,790$226,975$296,754Rent +$69,780
9$301,305$254,563$330,676Rent +$76,113
10$332,272$283,520$366,951Rent +$83,431

Compares net worth on a fixed-rate 30-year loan, with each path investing whatever it saves at the same return. Income taxes, the mortgage interest deduction and taxes on investment gains are left out. An educational estimate, not financial advice.

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Renting and buying now

30-year fixed rate
7.4%
US price-to-rent ratio
~18
Home prices since 1991
+4.3% a year
Rents since 1991
+3.3% a year

Freddie Mac average for the week of October 15, 2026, via FRED. Price-to-rent from the NAR median price and Zillow typical rent, September 2026. Growth from the FHFA index and the rent CPI.

Is it cheaper to rent or buy?

Month to month, renting usually is at today's rates. Owning a $400,000 home with $80,000 down at the 7.4% average 30-year rate costs about $3,016 a month in the first year, counting property tax, insurance and maintenance, against $2,014 to rent a similar home for $2,000. Over 10 years, renting and investing the difference at a 60/40 portfolio's 8.3% long-run return leaves $366,951, against $283,520 from buying once the home is sold. If those savings earned a bond-like 4.5%, buying would come out $8,251 ahead.

Net worth from buying a $400,000 home with $80,000 down, or renting it for $2,000 a month and investing at 8.3%, if you moved out after
YearsBuyingRentingAhead
1$66,832$112,298Renting by $45,466
3$107,275$156,874Renting by $49,599
5$151,750$207,458Renting by $55,708
7$200,686$265,015Renting by $64,329
10$283,520$366,951Renting by $83,431
15$451,532$590,725Renting by $139,192
20$666,672$908,915Renting by $242,242
30$1,307,204$2,036,189Renting by $728,985

How long do you need to stay for buying to be worth it?

Long enough for the home's growth and your loan payments to make up the 11% of the price lost to buying and selling it, and the higher monthly costs of owning. For a $400,000 home that rents for $2,000 a month, buying breaks even in year 10 if your savings would otherwise earn 4.5%; at 8.3%, it doesn't pull ahead within 30 years. A home that is cheap for its rent pays off sooner: at a price-to-rent ratio of 12, break-even comes in year 4 to 5.

When buying a $400,000 home first beats renting, by price-to-rent ratio and monthly rent, at 7.4% with 20% down and savings earning a bond-like or a 60/40 return
RatioRentEarning 4.5%Earning 8.3%
10$3,333Year 3Year 3
12$2,778Year 4Year 5
14$2,381Year 5Year 11
16$2,083Year 8None in 30 years
18$1,852Year 13None in 30 years
20$1,667Year 21None in 30 years
25$1,333None in 30 yearsNone in 30 years

Mortgage rates move break-even too. With the same home and rent, here is when buying first comes out ahead at other 30-year rates:

Break-even year for a $400,000 home that rents for $2,000 a month, by mortgage rate
Mortgage rateEarning 4.5%Earning 8.3%
5%Year 4Year 7
6%Year 6None in 30 years
6.5%Year 7None in 30 years
7%Year 8None in 30 years
7.4% (today)Year 10None in 30 years

What is the price-to-rent ratio?

A home's price divided by a year's rent for a similar home. A $400,000 home that rents for $2,000 a month has a ratio of 16.7. Nationally, the median existing home sold for $417,500 in September 2026 and typical rent was $1,932 a month, a ratio of about 18. The lower the ratio, the better buying looks: at today's rates, buying beats renting over 10 years only below a ratio of about 13.9 with 8.3% investment returns, or 17.1 with 4.5%.

The highest price-to-rent ratio at which buying still beats renting, by how long you stay, at 7.4%
You stayEarning 4.5%Earning 8.3%
3 yearsBelow 11.5Below 10.5
5 yearsBelow 14.0Below 12.3
7 yearsBelow 15.6Below 13.2
10 yearsBelow 17.1Below 13.9
15 yearsBelow 18.7Below 14.3

Ratios vary widely by city, and the national figure mixes apartments into typical rent while the median sale is mostly houses, so compare a home with the rent on one like it.

Why does the investment return matter so much?

Because the renter keeps the cash a buyer spends up front, $92,000 in this example, and invests it, along with the $1,002 a month that owning costs more at first. That money compounds for as long as you stay. In this example, buying wins over 10 years only if those savings would earn less than 4.9% a year, or if the home rented for more than $2,401 a month.

Assumptions and sources

Every default in the calculator is a published figure. Change any of them to match your market.

How the calculator works

  • Both paths start with the same cash. The buyer spends it on the down payment and closing costs; the renter invests it.
  • Each month, whichever path costs less invests the difference at the same return. Owning costs the mortgage payment, mortgage insurance, property tax, insurance, maintenance and HOA dues; renting costs rent and renter's insurance.
  • Property tax, insurance and maintenance are shares of the home's value, so they rise as it does. Rent goes up once a year, and HOA dues and renter's insurance with it.
  • With less than 20% down, mortgage insurance of 0.5% of the loan a year applies until the loan is scheduled to reach 78% of the price, when the Homeowners Protection Act ends it.
  • Buying's net worth is the home's value less the loan and the cost of selling, plus anything the owner invested. Break even is the first year it beats renting's.
  • Income taxes are left out on both sides: few households itemize (IRS), and most home sale gains are tax free (IRS Topic 701).

Rent vs buy questions

Is rent just throwing money away?

No more than much of a mortgage payment is. In the first month of the example, $1,973 of the $2,216 mortgage payment is interest, and property tax, insurance and maintenance add $800: $2,773 a month that, like rent, buys no part of the home. Only $242 goes toward owning it. The buyer also loses about $12,000 to closing costs and 8% of the sale price to selling.

Should I wait for mortgage rates to fall?

Lower rates bring break-even forward. At 6% instead of 7.4%, the example home breaks even in year 6 with 4.5% returns, though still not within 30 years at 8.3%. But nobody can reliably predict rates or prices, which can rise as rates fall, and refinancing later has its own closing costs.

Does the mortgage interest deduction change the answer?

For most people, no. Only 9.5% of tax returns itemized deductions in 2022, according to the IRS; the rest took the standard deduction, which is the same whether or not you pay mortgage interest. The calculator leaves income taxes out, which slightly understates the case for buying if you do itemize.

Do you pay tax when you sell your home?

Usually not. You can exclude up to $250,000 of gain on your main home from income, or $500,000 on a joint return, if you owned it and lived in it for at least two of the five years before the sale, according to the IRS. A renter's investment gains can be taxed, which the calculator also leaves out.

What if home prices fall?

Buying gets worse, and fast, because the loan doesn't shrink with the price. The Case-Shiller national index fell 27.4% from July 2006 to February 2012 and didn't regain its 2006 peak until January 2017. Prices are rising slowly now: up 1.9% in the year to July 2026 on Case-Shiller and 2.1% in the year to the second quarter on FHFA's index. Enter a lower or negative home price growth rate to test it.

Is this rent vs buy calculator financial advice?

No. It is an educational estimate built on long-run averages. Your local prices, rents, taxes and how long you really stay matter more than any national figure, and buying also brings things a spreadsheet can't price, like stability or the freedom to renovate. A HUD-approved housing counselor can review your situation for free or at low cost.