Rent vs Buy · Updated June 2026
Mortgage Interest Deduction Breakeven
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 7-year housing decision.
The mortgage-interest deduction is mostly mythology post-2017: with a $32,200 married standard deduction (2026), a couple needs ~$20k+ of itemisable interest+SALT before the first deductible dollar matters. Model it at your actual marginal benefit – often $0–$60/month, not the brochure number.
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
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.
| Rate | P&I payment | All-in owner cost | Breakeven |
|---|---|---|---|
| 4.5% | $1,743 | $3,222 | Year 9 |
| 5.5% | $1,953 | $3,432 | 15+ years |
| 6.3% | $2,129 | $3,608 | 15+ years |
| 7.0% | $2,289 | $3,768 | 15+ years |
| 7.5% | $2,405 | $3,884 | 15+ 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.
| Year | Buyer net worth | Renter 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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