Side-by-side comparisons
Buy vs rent: when does owning actually beat renting?
The setup
You're choosing between buying a $400,000 house at 6.5% with 20% down, or renting at $2,200/month and investing the difference. We model both for 10 years using real cost-of-ownership numbers (taxes, maintenance, insurance) — not the realtor pitch.
Option A
Buy ($400K house, 20% down, 6.5%)
After 10 years
Final balance
$119,267
Total contributions$80,000
Total interest+$39,267
Tax & risk: Mortgage payment $2,022/mo + property tax + maintenance + insurance ≈ $3,100/mo total. Builds equity. Illiquid.
Run this in the calculator →Option B
Rent + invest the difference
After 10 years
Final balance
$343,320
Total contributions$188,000
Total interest+$155,320
Tax & risk: Rent $2,200/mo (6.5% increases). Invest the $900/mo cash-flow gap + the $80K down payment at 8%.
Run this in the calculator →Difference
$224,053
Renting + investing usually wins on raw wealth in years 1–7 (high mortgage interest + transaction costs). Buying typically pulls ahead from year 8 onward as you build equity and rent inflation outpaces fixed mortgage payments. Below 5 years, almost always rent. Above 10 years, almost always buy. The middle is where your local market and lifestyle weight the answer.
Which is right for you?
If
You'll move within 3-5 years
Then
Rent. Transaction costs (5-8% to sell) eat any equity gained.
If
You're staying 7+ years and rent is rising fast in your area
Then
Buy. Fixed mortgage payment becomes a deflation hedge.
If
Your monthly cost to buy is more than 1.5× the cost to rent equivalent
Then
Rent. The market is overpriced relative to fundamentals.
If
You don't have 6 months of expenses saved on top of the down payment
Then
Wait. Buying with no cushion turns one job loss into foreclosure.
Key takeaways
- True cost of owning is roughly 1.5× the mortgage payment (taxes, maintenance, insurance, HOA).
- Selling costs (5-8% of sale price) erase years of equity gains for short-term owners.
- Renting is not 'throwing money away' — owning has its own large recurring costs that build no equity (taxes, maintenance, interest in early years).
FAQ
What about the tax deduction on mortgage interest?
+
Since the 2017 standard deduction nearly doubled, fewer than 10% of homeowners now itemize. For most middle-income buyers, the mortgage interest deduction provides zero benefit because the standard deduction ($14,600 single / $29,200 married in 2026) is larger than their itemizable expenses. Don't include it in your buy-vs-rent math unless you've confirmed you'll itemize.
Doesn't a house always go up in value?
+
Real (inflation-adjusted) home prices in the US grew about 1% per year on average from 1900 to 2020 — roughly matching inflation. Specific markets diverge wildly. After accounting for taxes, maintenance, and transaction costs, the average home barely keeps up with inflation. The S&P 500 has averaged 7% real over the same period. Houses are shelter first, investment second.
How do I figure out the breakeven year for my situation?
+
The 'price-to-rent ratio' is a useful shortcut: home price ÷ annual rent for an equivalent place. Under 15: usually buy. 15-20: roughly even, depends on holding period. Above 20-25: rent + invest almost always wins. Run our mortgage calculator with your real numbers and compare to renting + investing the monthly difference at 7%.