Skip to content
MovingCal

Rent vs Buy · Updated June 2026

Rent vs Buy: Opportunity Cost of Capital

The core experiment: rent a comparable home for $1,800/month instead of carrying a $3,500/month all-in ownership cost, and invest both the $1,700 monthly difference and the $120,000 you didn't put down. At a 7% return, that renter holds $289,339 after 5 years, $526,846 after 10, and $1,327,174 after 20 – the number any buyer's equity must beat, not zero.

"Renting is throwing money away" gets the accounting backwards: the buyer also throws money away – interest (most of early payments at 2026 rates), property tax, maintenance, insurance, and ~10% round-trip transaction costs. The honest comparison is unrecoverable costs vs unrecoverable costs, with both parties' savings invested. That's what this calculator models.

Opportunity cost of capital is the formal name for the comparison: every dollar of equity earns the housing return (appreciation minus carry) instead of the market return. When the spread is negative – high price-to-rent markets, high rates – equity is expensive capital.

Rent vs buy calculator · 2026

Verdict at your horizon

–

–

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

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

  • $120k down + $1,700/mo at 7% → $289,339 (5y) · $526,846 (10y) · $1,327,174 (20y).
  • Compare unrecoverable costs both ways – not rent vs mortgage.
  • Stocks ~10% nominal vs housing ~4.4% – leverage closes most of it.
  • Transaction costs (~10% round trip) take 5–7 years to amortise.
  • The strategy's #1 failure mode is not investing the difference.
Renter's invested wealth: $120,000 down payment + $1,700/month at 7% (2026)
YearInvested down paymentMonthly differencesTotal renter wealth
3$147,005$67,663$214,668
5$168,306$121,033$289,339
10$236,058$290,788$526,846
15$331,084$528,878$859,962
20$464,362$862,812$1,327,174
30$913,471$1,988,069$2,901,540

The math, made explicit

Renter wealth at year T = down payment compounding at the market return + monthly differences compounding from each deposit date. Buyer wealth = home value × (1 + appreciation)^T × (1 − selling costs) − remaining mortgage. The crossover depends almost entirely on three spreads: market return vs appreciation (historically +3 to +5 points), rent vs owner cost (market-specific), and how long transaction costs amortise.

2026 starting conditions matter: with 30-year rates near 6.3% and price-to-rent ratios still elevated in coastal metros, the monthly ownership premium is historically wide – which is why this decade's calculators keep siding with disciplined renters on sub-10-year horizons, reversing 2010s intuition.

Where the strategy breaks

Three honest failure modes: discipline (the difference must actually be invested, automatically, through drawdowns), rent growth (the gap narrows ~3%/year while a fixed mortgage doesn't – long horizons erode the renter edge), and the leverage asymmetry (buyers control a large asset with 20% down; in strong appreciation regimes, leveraged housing wins despite lower asset returns).

The decision rule that survives all regimes: rent when your horizon is short, your market's price-to-rent is high, or your alternative investing is genuinely automatic; buy when you'll stay 10+ years, your market's ratio is modest, and stability carries personal value the spreadsheet can't price.

FAQ

Frequently asked questions

Is renting and investing really better than buying?

It depends on three measurable spreads: market return vs home appreciation, rent vs all-in owner cost, and your horizon vs the ~5–7 years transaction costs need. In 2026's high-rate, high-ratio coastal markets, disciplined renters win sub-10-year horizons; long-stay buyers in moderate markets still win.

What return should I assume for stocks?

Long-run S&P 500: ~10% nominal, ~7% real. Use 6–7% for planning (taxes, fees, behaviour), and remember housing's 3.5–4.5% nominal appreciation is also an assumption – symmetry in conservatism keeps the model honest.

Doesn't leverage make the house win anyway?

5:1 leverage on 4% appreciation ≈ 20% equity returns early on – before carry costs (3–5%/year of value) and transaction drag. Leverage amplifies strong markets and devastates flat ones; it's a regime bet, not a free lunch.

What about the homeowner tax breaks?

Post-2017 reality: the higher standard deduction means most owners never itemise mortgage interest, and the §121 capital-gains exclusion ($250k/$500k) is the one broadly valuable break. The model's defaults already reflect typical non-itemising treatment.

What is the 5% rule shortcut?

Annual unrecoverable ownership cost ≈ 5% of home value (1% tax + 1% maintenance + 3% capital cost). If a year of rent < 5% of the equivalent purchase price, renting is the cheaper way to consume the same housing.

Keep exploring

Cost of Living

Salary After Tax

Relocation Budget

Country Comparison

Plan the whole move, not just one number.

Every MovingCal tool shares the same 2026 dataset – carry your cities, salary, and countries from one calculator to the next.

Cost of Living Salary After Tax Relocation Budget Country Comparison