The rent vs buy decision is one of the biggest financial choices you will face. Conventional wisdom says buying is always better, but the reality depends on your market, financial situation, time horizon, and lifestyle. In 2026, with home prices near $410,000 nationally and mortgage rates around 6.5–7.0%, the math does not always favor buying.
The True Cost of Homeownership
Many first-time buyers underestimate the total cost of owning a home. Beyond the mortgage payment, you must budget for:
- Property taxes: 0.5–2.5% of home value annually (national average ~1.1%). On a $410,000 home, that is ~$4,500/year.
- Homeowners insurance: $1,500–$3,000/year depending on location and coverage.
- Maintenance and repairs: Budget 1–2% of home value annually. On a $410,000 home, expect $4,100–$8,200/year for upkeep.
- PMI (if less than 20% down): 0.5–1.5% of loan amount annually.
- HOA fees: $200–$500+/month for condos or planned communities.
- Closing costs: 2–5% of purchase price, paid upfront. On a $410,000 home, that is $8,200–$20,500.
The Hidden Advantage of Renting
Renters avoid all the costs above except their monthly rent payment and renter's insurance (~$15–$30/month). The money saved can be invested in the stock market, which has historically returned 7–10% annually — often outpacing home appreciation in many markets.
Renting also provides flexibility: you can move for a job opportunity, downsize easily, and avoid the risks of a declining housing market. There are no repair costs, no property tax bills, and no risk of being underwater on a mortgage.
When Buying Makes Sense
Buying tends to be the better financial choice when:
- You plan to stay 5+ years: Buying has high upfront costs (closing costs, moving). You need several years to recoup these through equity building and appreciation.
- You have a stable income and career: A mortgage is a 15–30 year commitment. Job instability can make homeownership risky.
- You have 10–20% for a down payment: This avoids PMI and reduces your monthly payment significantly.
- Local rent is high relative to buying costs: In some markets, monthly mortgage payments (with principal building equity) are comparable to rent.
- You value stability and customization: Homeownership offers permanence, the ability to renovate, and protection against rent increases.
The Breakeven Point
The breakeven point is the number of years you need to own before buying becomes cheaper than renting. This accounts for all ownership costs versus rent plus investment returns on the difference. In 2026, the breakeven point in many U.S. markets is 5–8 years, though it varies significantly by location.
Our Rent vs Buy Calculator computes your specific breakeven year based on your local costs, showing you exactly when buying starts to make financial sense for your situation.
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Frequently Asked Questions
Is renting really throwing money away?
No. Renting pays for shelter — a real and essential service. Homeownership costs include mortgage interest (which is also "thrown away" to the bank), property taxes, insurance, maintenance, and opportunity cost on the down payment. The real question is whether the equity you build through ownership exceeds the returns you could earn by investing the difference. In many markets and timeframes, renting and investing can build equal or greater wealth.
How much should I save for a down payment?
Ideally 20% to avoid PMI, but many buyers succeed with 5–10% down. On a $410,000 home, 20% is $82,000, while 5% is $20,500. Consider the tradeoff: a smaller down payment gets you into the market sooner but increases your monthly costs (larger loan plus PMI). Use our Mortgage Calculator to model different down payment scenarios.
What is the 5-year rule for buying vs renting?
The 5-year rule is a general guideline suggesting you should only buy if you plan to stay at least 5 years. This gives you time to recoup the substantial upfront costs of purchasing (closing costs, moving expenses, and initial equity loss to interest). In high-cost markets or when rates are high, the breakeven point may be 7–10 years. Our calculator shows your exact breakeven year.
How do I factor in home appreciation when comparing renting vs buying?
Historically, U.S. home prices have appreciated about 3-4% annually on average, but this varies dramatically by market and time period. Some areas have seen 8-10% annual gains while others have been flat or declined. When using our Rent vs Buy Calculator, use a conservative appreciation estimate (2-3%) rather than recent hot-market growth rates. Also remember that appreciation applies to the full home value, not just your down payment — this leverage effect is one of homeownership's key financial advantages.