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Rent vs Buy · Updated June 2026

Transaction Costs Over 3 Years vs Renting

The benchmark scenario (2026 medians: $430,000 home, 20% down at 6.3%, vs $2,100/month rent): buying's all-in cost runs $3,416/month against the rent, ~10% round-trip transaction costs sit on the buyer's ledger, and the net-worth crossover lands beyond the modeled decade – the single number that should anchor any 3-year housing decision.

Three-year amortisation makes the toll explicit: ~$43,000 of round-trip costs on a $430,000 home = $1,194/month of friction. Add it to ownership's carrying costs and the 3-year rent comparison isn't close in any normal market.

Breakeven is mostly a transaction-cost amortisation problem: ~$13,000 to buy and ~$30,000 to sell (at this price) must be outrun by appreciation + principal paydown − ownership cost premium. Everything in the calculator – rates, rent growth, appreciation, costs – just reshapes how fast that race runs.

Rent vs buy calculator · 2026

Verdict at your horizon

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Mortgage P&I
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Owner all-in /mo
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Cash needed upfront
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PMI
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Buyer net worth
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Renter net worth
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Interest paid by then
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Price-to-rent ratio
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Net worth year by year

Buying Renting + investing

Renter invests the down payment + closing costs + monthly difference at your chosen return. PMI of 0.55%/yr is added automatically while the down payment is under 20% and equity is below 20%. Price-to-rent under ~15 usually favors buying; over ~20 favors renting.

Key insights

Key insights

  • Benchmark breakeven: 10+ years ($430,000 @ 6.3% vs $2,100 rent).
  • Rate sensitivity: year ~4 at 4.5% → 10+ years at 7.5%.
  • ~75% of year-one payments is interest; ~6% of loan retires by year 3.
  • Round-trip toll at this price: ≈ $43,000.
  • Stay-horizon must exceed breakeven with margin – or rent the option.
Breakeven year by mortgage rate ($430,000 home vs $2,100 rent, 2026)
RateP&I paymentAll-in owner costBreakeven
4.5%$1,743$3,222Year 9
5.5%$1,953$3,43215+ years
6.3%$2,129$3,60815+ years
7.0%$2,289$3,76815+ years
7.5%$2,405$3,88415+ years

What actually sets your breakeven year

In sensitivity order: (1) interest rate – see the table: this identical purchase breaks even in year ~4 at 4.5% and 10+ at 7.5%; (2) price-to-rent ratio – 17 here; every point of ratio adds roughly half a year; (3) transaction costs – negotiating 1% off the round trip claws back ~8 months; (4) appreciation assumptions – the input most worth being pessimistic about, since it's the one you control least.

Early-year amortisation explains the shape: at 6.3%, ~75% of year-one payments is interest, and only ~6% of the loan retires by year three. The buyer's early "equity" is mostly their own down payment – which is why no realistic appreciation rescues a 2-year ownership.

Using breakeven for the actual decision

The decision rule: your confident-stay horizon must exceed the breakeven year with margin. "Confident" deserves honesty – job-change probability, family-size trajectory, and neighborhood certainty all discount stated horizons. Surveys put median first-home tenure near 8 years, but the left tail (the 30% who move within 5) is where the transaction toll collects.

When horizons are genuinely uncertain, renting carries option value the model underprices: the renter can buy later at will; the early-selling buyer pays ~$30,100 to change their mind. Asymmetric reversibility is worth years of breakeven patience.

Net worth paths at 6.3% (2026 benchmark scenario)
YearBuyer net worthRenter net worth (invested)Buying advantage
1$73,890$118,733-$44,843
3$112,150$161,255-$49,105
5$153,685$207,959-$54,274
7$198,802$259,347-$60,545
10$273,947$346,470-$72,523

FAQ

Frequently asked questions

How long do you need to own to break even?

In 2026 conditions: 5–8 years for median US markets (the benchmark above lands past year 10), 3–5 in low price-to-rent metros, 8–12+ in coastal high-ratio ones. The old 5-to-7 rule now reads 6–8 at current rates.

Why is breaking even so slow?

Three compounding drags: ~10% round-trip transaction costs, interest-heavy early amortisation (~75% of year-one payments at 6.3%), and ownership's non-equity carrying costs (tax, insurance, maintenance) running above rent in most metros right now.

How do interest rates change it?

More than any other input: the identical benchmark purchase breaks even around year 4 at 4.5%, year 6 at 5.5%, year 8 at 7%, and drifts past a decade at 7.5%. Refinance optionality helps but shouldn't underwrite the purchase.

Should I buy if I might move in 3 years?

No, in nearly all markets: three years amortises ~$1,194/month of pure transaction friction on this price – a hole appreciation rarely fills. The exceptions (assumable-rate arbitrage, genuine below-market buys) announce themselves.

Does the mortgage interest deduction speed up breakeven?

Rarely, post-2017: most households never clear the $32,200 married standard deduction with itemisables, making the deduction's marginal value $0–$60/month. Model your actual itemising position, not the folklore.

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