Key Points
- At Freddie Mac’s 7.40% average mortgage rate, owning our $510,000 example house for six years cost $302,015 in money that never came back, compared with $173,664 to rent the same house.
- Even after $162,500 of price appreciation, owning cost $139,515 on net. A renter who invested the down payment and the monthly savings at 9.5% would finish about $78,400 ahead.
- The mortgage rate drives the result. Below about 4.8%, buying this same house beats renting it.
Buy Vs. Rent Calculator: What Does Each Really Cost?
The defaults reproduce the example house on this page (bought for $510,000, sold six years later for $672,500, or rented for $2,400 a month). Change any number to run your own.
Our Example At 7.40% (6 Years)
Stay 15 Years, Rent And Costs Up 3%/Yr
Where the money goes when you buy vs. rent over the period you chooseOver The PeriodBuyRent
How This Calculator Works And Its Assumptions
Same money, two paths. Both sides spend the same total amount of cash. The buyer pays the down payment, closing costs, mortgage, taxes, insurance, maintenance and HOA. The renter pays rent and renters insurance and invests everything else: the down payment and closing costs on day one, plus the difference in any month when owning costs more than renting. When renting costs more, the buyer invests the difference instead.
Net cost. Net cost is the cash you spent minus what you walk away with at the end. For the buyer, that’s home equity after selling costs (home value minus loan balance minus selling costs) plus any investment account. For the renter, it’s the investment account. The lower net cost wins, and the gap between the two is how far ahead the winner finishes.
Why a net cost can be negative. If the investment account grows by more than you paid in rent, you walk away with more than you spent, so the net cost drops below zero. That shows up as a net gain. It happens over long periods with a high investment return, because returns compound while rent is a fixed monthly cost.
Sunk costs. Money that never comes back: mortgage interest, taxes, insurance, maintenance, HOA and the costs to buy and sell for the owner, and rent plus renters insurance for the renter.
Assumptions. Fixed-rate mortgage with standard amortization. Taxes and maintenance are a percentage of the purchase price and, like insurance and HOA, rise by the owner cost growth rate. Investment returns compound monthly with no taxes on gains, which favors whoever invests more. The model ignores the mortgage interest deduction, PMI, utilities and moving costs. The article’s line items came from real statements, so the defaults land within about $1,100 of them. This is an estimate for comparison, not financial advice.
Defaults: the article’s example at Freddie Mac’s 7.40% average rate (October 8, 2026). The College Investor.
Few personal finance debates run as hot as this one: should you buy a house or rent an apartment? One side says rent is throwing money away. The other says you can rent, invest the difference, and come out ahead. Our real estate vs. stocks comparison covers the investing side of that argument.
The short answer at 2026 mortgage rates: renting the same house wins over a typical stay, as long as you invest the money you would have put into the house. The result depends on your rate, how long you stay and what you do with the savings. Plug your own numbers into the calculator above, or use our mortgage calculator to see the monthly payment alone.
My take hasn’t changed: for your primary residence, buying or renting is partly a personal preference, and both have pros and cons. People don’t treat the house they live in like an investment. They put in money and personal touches, and they often spend more than they would as renters, which is why a house hacking setup is one of the few ways to make a home pay for itself.
I’m going to share very real math on the true cost of homeownership and compare it with renting the exact same house. I was lucky enough to find a similar house in the same subdivision listed for rent, so these numbers are about as apples-to-apples as you’ll get. The price, costs, rent and sale price are the real history of the house. To make it useful today, the mortgage is financed at Freddie Mac’s 7.40% average 2026 rate, and you can change any number with our financial calculators.
The Variables
Any buy vs. rent comparison starts with the variables, and one premise: you have to live somewhere that costs money (so, not your parents’ house). If you have a free housing option, that will always win. Everyone else is choosing between two costs, and our emergency fund basics apply either way.
Buying a home brings a purchase price and a sale price. It also brings a down payment, mortgage payments (part interest, part principal), insurance and much more, plus large transaction costs to buy and to sell. When you exit your “investment,” selling costs alone can take 5% to 6% of the sale price, which is why what real estate agents do matters to the math.
Realizing your home equity is hard. If you sell, you have to live somewhere else, and prices in your area have usually risen at every level, so your equity goes right back into the next home. The exception is geo-arbitrage, where you sell in a high-cost area and move somewhere cheaper. Our real estate investing options cover ways to own property that you don’t live in.
Renting eliminates most of these costs. Renting has two: rent each month and renters insurance. Maintenance, property taxes and repairs belong to the landlord.
For this comparison, we’re ignoring utilities. The houses are the same size in the same neighborhood, so electricity and water should cost the same in both, and they’d show up the same in a budget built around your housing payment.
True Cost Of Homeownership
Our example is a three-bedroom, two-bathroom house in the suburbs of a higher-cost-of-living area. It was purchased for $510,000 and sold six years later (almost to the day) for $672,500, a gain of $162,500. That number is what gets people excited about buying, but comparing real estate with stocks shows how much more there is to a property than its price.
To buy this house, we put $103,000 down (effectively 20%) and took out a conventional 30-year fixed mortgage for $407,000. At the 7.40% average rate Freddie Mac reported on October 8, 2026, the principal and interest payment is $2,818 a month. If you’re weighing a purchase with student debt, our home buying with student loans explainer covers how lenders treat it.
Here’s the cost history of the house. Every figure is a total for all six years of ownership, with mortgage interest calculated at 7.40%. You can rebuild any line in the calculator above, and our other financial calculators cover the rest of the home budget.
Buy Vs. Rent The Same House For Six Years At A 7.40% Mortgage Rate
CostBuyRent
Up Front
Down Payment$103,000—
Purchase Expenses$5,179—
Sunk Costs Over Six Years
Mortgage Interest At 7.40%$175,071—
Rent ($2,400 A Month)—$172,800
Homeowners Or Renters Insurance$7,254$864
HOA Dues$22,680—
Property Taxes$33,392—
Maintenance And Yard Care$13,000—
Selling Expenses$45,439—
Total Sunk Costs$302,015$173,664
What You Get Back
Home Appreciation$162,500—
Investment Growth At 9.5%—$112,520
Net Cost Over Six Years$139,515$61,144
You’d Be $78,371 Richer Renting
$510,000 home sold for $672,500, $407,000 30-year fixed loan at 7.40%. Both households spend the same $387,400 out of pocket. The renter invests the down payment, closing costs and the $1,466 monthly difference. Source: The College Investor, Freddie Mac.
Purchase expenses: $5,179. Title charges ($2,980), recording ($120), escrow fees ($1,725) and prorated taxes ($354) are the one-time costs the buyer paid out of pocket to close. That doesn’t include a home inspection, which could add another $1,000. Our mortgage lender comparison shows how lender fees vary.
Monthly sunk costs: $205,005. Mortgage interest ($175,071), insurance ($7,254) and HOA dues ($22,680) are the costs paid every month that go to someone else, not toward equity. Only the interest part of the mortgage payment counts, since the principal builds equity. Some argue you can deduct mortgage interest, but that only helps if you itemize, and the most common tax deductions explain why most households take the standard deduction instead.
Annual sunk costs: $33,392. Property taxes are paid every year and also go to someone else. You can deduct them too, but only if you itemize. The state and local tax cap rose to $40,000 for 2025 ($20,000 if married filing separately), reduced once income passes $500,000, so the cap isn’t the obstacle it was. The $32,200 standard deduction for married couples in 2026 usually is, and our mortgage calculator shows how taxes fit into the monthly payment.
Maintenance and upgrade costs: $13,000. Lawn and yard care ($7,000), deck repairs ($3,000) and home repairs ($3,000) are costs most renters never pay. Homeowners are responsible for repairs, and skipping them can turn a small problem into a big one and cut your resale price. Keeping a high-yield savings account for repairs keeps them off a credit card.
No major remodels happened in this example, but the older a home gets, the more upgrades it needs to sell for top dollar. Buyers won’t pay full price for a 15- to 20-year-old kitchen and bathrooms or old carpet. You either pay for upgrades as an owner or accept a lower sale price, and either way it’s a cost, which is one reason real estate investing ideas treat a rental very differently from a home.
Selling expenses: $45,439. Commission ($33,612), transfer fees ($500), termite clearance ($9,600), HOA documents ($350) and escrow fees ($1,377) add up fast. You have to sell at some point to get the equity out, or the whole comparison is moot. Selling a house isn’t like selling a stock, and what agents actually do for that commission is worth reading before you list.
The commission in this example was 5.0% of the sale price. Commissions have always been negotiable, and since NAR’s settlement changes took effect on August 17, 2024, offers to pay the buyer’s agent no longer appear on the MLS and buyers sign written agreements with their own agents. Ask about the full fee before you list, the same way you’d compare online mortgage lenders before you borrow.
Total Sunk Costs
All of the sunk costs of owning this house for six years come to $302,015: $5,179 to buy, $205,005 in monthly costs, $33,392 in property taxes, $13,000 in maintenance and $45,439 to sell. That’s money spent on owning the house that doesn’t build equity, and it’s gone, unlike the principal you’d see on an amortization schedule in our mortgage calculator.
Mortgage interest alone is $175,071 of that total, more than half. Our real estate vs. stocks comparison shows how carrying costs like these drag on a home’s return.
You do have an asset that gained value. That doesn’t change the fact that you spent money maintaining it that added no direct value, and the same is true for a rental property you own.
The Math Of Homeownership
We bought the house for $510,000 and sold it for $672,500. At 7.40%, the loan balance at sale is $379,176 after six years of principal payments. Our mortgage calculator shows the same payoff curve for any loan.
That means you had $293,324 in equity at the sale. You came in with $103,000, so your equity grew by $190,324 in six years, from price appreciation ($162,500) and principal payments ($27,824). Appreciation like that is why real estate investing appeals to so many people.
But the $27,824 of principal isn’t a gain. It’s your own money, paid in with each mortgage payment and handed back at the sale. The real gain is the $162,500 of appreciation. Subtract the $302,015 in sunk costs, and owning this house cost a net $139,515 over six years. Even a high-yield savings account would have done better with the down payment.
Any of these expenses could change in either direction. You might buy without an HOA or pay lower property taxes, or you might face a major repair, and our emergency fund basics cover how much to keep for that.
A reader asked how so much interest was possible on a mortgage. It’s amortization: early payments are mostly interest. At 7.40%, about 86% of six years of mortgage payments ($175,071 of $202,895) goes to interest and only $27,824 to principal, which is why our home buying with student loans explainer stresses rate shopping.
The Cost Of Renting
Renting has far fewer sunk costs. This house rents for $2,400 a month, and renters insurance would cost $12 a month. Over the same six years, rent comes to $172,800 and insurance to $864.
That brings the total cost of renting the same house for the same period to $173,664. You could count the security deposit as a sunk cost, which would add $2,400. I don’t, because many jurisdictions require deposits to earn interest, and you get it back unless you damage the place. Our high-yield savings account list is a good home for the deposit you’ll need at move-in.
Some landlords charge rental application fees to cover credit checks, often around $25, and many charge nothing. Renters with pets may also pay a pet deposit or monthly pet rent, which homeowners avoid. Some renters now earn rewards on rent through programs like Bilt Rewards, which trims the cost a little.
Our example rent is high for the country. The median asking rent for vacant rentals was $1,531 in the second quarter of 2026, according to the Census Bureau. Where you rent changes the price, even within the same city, so if I were renting, I’d focus on keeping that cost as low as possible and putting the savings into a money market account or investments.
The Pros And Cons Of Renting
Renting costs less in sunk costs, but it comes with trade-offs, and for some people the psychological costs outweigh the financial benefit. Here are the main ones, and our debt-to-income explainer covers what you’d need to qualify if you decide to buy instead.
Pros
- Lower sunk costs
- No maintenance or repair bills
- No buying or selling costs
- More flexibility to move where you need to
Cons
- The landlord can decline to renew your lease or give notice to end it
- Little room to personalize or remodel
- Community rules can restrict parking or pets
- Repairs require coordinating with the landlord and a repair person
Renting is a viable choice financially, but it has real logistical and emotional costs, chiefly the risk of having to move through no fault of your own. Our renters insurance explainer covers protecting your belongings if you do rent.
Buy A House Vs. Rent An Apartment
Renting wins this comparison at 2026 rates, on sunk costs alone and again once appreciation and investment growth are counted on both sides. Here’s how the money and the other factors compare. The calculator at the top of this page lets you change any assumption, and our financial calculators hub has more tools.
Comparing Sunk Costs
Sunk costs are the money you spend and never get back. Homeowners have a lot of them, from buying and selling costs to taxes and mortgage interest, while renters pay rent and a few small extras. Our real estate vs. stocks comparison explains why those costs matter more for a home than for a fund.
In this example, owning cost $302,015 in sunk costs and renting cost $173,664. You’d pay $128,351 more to own than to rent, about $21,392 a year. That’s nearly three times the 2026 IRA contribution limit of $7,500, and our IRA contribution limits page covers who can contribute.
That difference grows if you invest it in something like a low-cost index fund, which is the next comparison.
Comparing Investment Gains
Both buying and renting offer a chance to build wealth, and the home’s gain is the main reason owners see their house as the path to wealth. Over the long run, home prices have grown far more slowly than stocks. NYU Stern’s historical return data shows home prices rising 4.20% a year from 1928 through 2025, compared with 10.02% for the S&P 500 with dividends, and our S&P 500 investing explainer covers how to buy the index.
Rent isn’t throwing money away if you invest what you save. Not every renter does, but plenty do, and it’s the smart move. Our example uses a 9.5% annual return for those investments, and an index fund is the simplest way to earn the market’s return.
Homeownership Gains
If you view your home as an investment, the $162,500 of appreciation didn’t cover the $302,015 it cost to own, so the house lost $139,515 over six years. The down payment would have earned more sitting in a high-interest savings account.
Renting Gains
The renter keeps the $108,179 the buyer spent up front ($103,000 down plus $5,179 to close) and spends about $1,466 a month less than the buyer, who pays $2,818 in principal and interest plus insurance, HOA dues, taxes and maintenance. Invest all of it at a 9.5% annual return, and the renter would have $326,256 at the end of six years. Our index fund explainer shows where that money could go.
That’s $213,736 contributed and $112,520 in growth. Subtract the growth from the $173,664 in rent and renters insurance, and renting cost a net $61,144 over six years. Automating the transfer into an S&P 500 index fund is how most renters who do this actually stick with it.
Investing the savings shifts the math toward renting, but most renters won’t do it. That doesn’t make it any less valid as a comparison. If you can afford to buy or rent the same house, you can afford to invest the difference, and a money market account is a fine place to park it between purchases.
Putting It Together: Renting Wins By About $78,400
Renting this house beats buying it by about $78,400 over six years at a 7.40% mortgage rate. Both households spend the same $387,400 out of pocket over six years. The buyer puts it into the down payment, closing costs, mortgage payments and upkeep. The renter puts it into rent and an investment account, the same approach behind our financial calculators hub.
At the end, the buyer sells for $672,500, pays $45,439 in selling costs and the $379,176 loan balance, and walks away with $247,885. The renter has $326,256 in the investment account. That’s a $78,371 lead for renting, the same gap you get by comparing the buyer’s $139,515 net cost with the renter’s $61,144, and the calculator at the top of this page shows it year by year. Renters insurance is included on the renter’s side.
Buying never catches up in this example. Even if the buyer stayed 15 years and rent rose 3% a year, the calculator still has renting ahead, because a 9.5% investment return outpaces the house’s 4.7% annual appreciation. The math changes if the renter earns less: at a 6% return with rent rising 3% a year, buying breaks even in year 11. Our real estate vs. stocks comparison explains why the return assumption matters so much.
Taxes would narrow the gap a little. Most married homeowners can exclude up to $500,000 of gain on a home sale ($250,000 if single), while a renter’s investment gains are taxed in a brokerage account. The calculator leaves taxes out of both sides, and our capital gains tax brackets show what the renter would owe.
Long-Term Transaction Costs
Renting has almost no transaction costs. You might pay an application fee, and the security deposit comes back if you leave the rental in good shape. Buying and selling a home is expensive, and Americans move, though our real estate agents explainer covers ways to cut the fee.
Homeowners now stay longer than they used to. The typical seller had lived in the home for a record 11 years, according to NAR’s 2025 Profile of Home Buyers and Sellers. The longer you stay, the more years you have to spread buying and selling costs over, which our mortgage calculator can’t show but the buy vs. rent calculator can.
In our example, buying cost $5,179 and selling cost $45,439. Together, that’s $50,618, or 16.8% of the total sunk costs of ownership. Do that several times over a lifetime and it puts a real dent in the equity you build, which is a strong case for house hacking or staying put.
Comparing Psychological Costs
No buy vs. rent discussion is complete without psychological costs. I use the term broadly, but things like the threat of having to move are a real cost, and so is the stress of not having a fully funded emergency fund when a big repair hits.
The biggest drawback of renting is that you don’t own the place, so you’re subject to the landlord’s decisions. Month-to-month renters can be told to leave with 30 to 60 days’ notice, which can be traumatic. Longer leases and renting in a professionally managed building lower that risk without removing it, and renters insurance covers your things if you do have to move.
You also can’t customize a rental much. Owners can remodel, upgrade, paint and change flooring. Renters usually can’t, and even small changes like paint have to be undone at move-out, which is part of why house hacking appeals to people who want control and some income.
Renters also face rules owners may not, such as pet limits or parking restrictions. Those can weigh heavily on how you feel about renting, and they’re one of the big perks of owning, as Nick Maggiulli discusses in Just Keep Buying.
How To Boost The Return Of Homeownership
Real estate can be a great investment, but your primary residence isn’t a real estate investment. You buy it with a different mindset and a different purpose than investment real estate.
You can still boost the return of homeownership. House hacking, covered in How To Get Started House Hacking, means using parts of your home to earn money: renting a bedroom, renting spare garage or yard space, or renting the whole house while you’re away.
These living arrangements aren’t for everyone, and that’s a theme of this whole comparison. Renting and investing the difference can leave you better off, and owning a home isn’t an automatic path to wealth. Our real estate investing options cover ways to own property without living in it.
How Much Does The Mortgage Rate Change The Answer?
The mortgage rate is the biggest swing factor in this comparison. Keeping every other number the same, buying this house beats renting it only if the rate is below about 4.8%. Freddie Mac’s Primary Mortgage Market Survey put the 30-year average at 7.40% on October 8, 2026, up from 6.30% a year earlier, and our mortgage calculator shows the payment at any rate.
This house was originally bought in 2014 at a rate near 3.4%. At that rate, six years of interest totals about $77,162 instead of $175,071, and the calculator has buying about $43,400 ahead of renting. A rate roughly twice as high turns a win for buying into a $78,400 win for renting, which is why our online mortgage lender comparison is worth a look before you commit.
That’s not a reason never to buy. It means that at 7.40%, buying makes sense when you’ll stay a long time, when rent for a comparable home is high relative to the price, or when you can lower the rate. Our home buying with student loans explainer and saving for a house while paying off student loans cover the prep.
Renting For Now? Keep The Down Payment Working
If the math says rent, the money you’d have put down should still earn something. A high-yield savings account keeps it safe and FDIC insured while you watch rates. CIT Bank is one option we’ve reviewed, and our best high-yield savings accounts list compares current rates.
Final Thoughts
With the math laid out, renting wins at today’s rates. At a 7.40% mortgage, owning this house cost $139,515 on net over six years, and a renter who invested the difference finished about $78,400 ahead. Buying only wins this example at a rate below about 4.8%, or for a renter who doesn’t invest the savings. Run your own numbers in the calculator, and our mortgage calculator can check the monthly payment.
Homeownership has big perks, but it isn’t the “greatest investment” many people make it out to be. Real estate as an asset class can be a good investment, but your primary home is where you live, and our real estate vs. stocks comparison covers how to own both.
Many statistics showing homeowners are better off reflect behavior and demographics, not just owning a home. Homeowners tend to be older: the median first-time buyer was 40 and the median repeat buyer 62 in NAR’s 2025 buyer profile, both record highs. Older households have had more years to save, as our IRA contribution limits page shows for retirement accounts.
After 30 years of mortgage payments, you do own an asset outright. The questions are how much you spent outside of equity and what that money could have done elsewhere. Could you have built a larger net worth another way, perhaps through S&P 500 index investing?
So the next time someone tells you “rent is throwing money away,” you can show them that homeowners have plenty of sunk costs too. And when someone says renting always wins, show them the same house at a 3.4% rate. Either way, keep your emergency fund separate from your house money.
Note: This article was inspired by the comments on our TikTok video here. Check it out and subscribe to our channel if you’re on TikTok.
Further Studies
Here are some studies on the topic you may find interesting, alongside our own real estate vs. stocks comparison:
What do you think in the buy versus rent debate?
Frequently Asked Questions
Is It Better To Buy A House Or Rent An Apartment In 2026?
At a 7.40% mortgage rate, renting usually wins if you invest what you save. In our example, renting the same house came out about $78,400 ahead over six years. Buying wins when rents are high relative to prices, you can lock a lower rate, or you wouldn’t invest the difference, and our mortgage calculator shows the payment side.
How Long Do You Need To Stay For Buying To Beat Renting?
It depends on the rate, how fast prices and rent rise, and what the renter earns. In our example at 7.40%, buying never catches up when the renter earns 9.5%, even over 15 years with rent rising 3% a year. If the renter earns 6%, buying breaks even in year 11. At a 3.4% rate, buying broke even in year three. Try your own numbers in the calculator at the top of this page or in our other financial calculators.
Is Rent Throwing Money Away?
No. Rent buys housing, just as mortgage interest, property taxes and insurance do. In our example, owning cost $302,015 in money that never came back over six years, compared with $173,664 for renting, and our real estate vs. stocks comparison shows what the renter’s savings can do.
Doesn’t Buying Win Once The Mortgage Is Paid Off?
Not always. In our 7.40% example, a renter earning 9.5% stays ahead even over 30 years with rent and owner costs rising 3% a year. At a 6% return, buying pulls ahead after year 11. The typical seller stays 11 years, according to NAR, so most owners sell before a paid-off house helps, which is why house hacking and staying put both help.
Does The Mortgage Interest Deduction Change The Math?
Usually not much. In year one at 7.40%, our example loan generates about $29,990 of interest, plus $5,565 of property tax. That’s only about $3,355 above the $32,200 standard deduction for married couples in 2026, so the extra tax savings are small. Our most common tax deductions list covers itemizing.
Where Should I Keep A Down Payment While I Decide?
Keep it somewhere safe and liquid, like a high-yield savings account or money market account, not the stock market. You may need the money on short notice when you find a home. Our short-term investments list and best money market accounts compare options.
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Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.
