Last updated: October 5, 2026 · This is a model with stated assumptions, not a prediction. Your local numbers will differ.
“Renting is throwing money away” is one of the most repeated pieces of financial advice, and one of the least precise. Owners also pay costs they never get back: interest, property taxes, insurance, maintenance and the cost of buying and selling. The honest way to decide is to compare total costs and wealth over the time you expect to stay.
The unrecoverable costs of each option
| Renting | Owning |
|---|---|
| Rent | Mortgage interest |
| Renters insurance | Property tax and homeowners insurance |
| – | Maintenance and repairs |
| – | PMI and HOA dues, if any |
| – | Closing costs to buy and selling costs later |
| – | Lost investment return on the down payment |
A worked model
Assumptions: a $350,000 home with 10% down and a 30-year loan at 6.5%; closing costs of 3% of the loan; property tax 1.1% and maintenance 1% of the home’s value per year; insurance $150 a month; PMI 0.4% of the loan until 78% loan-to-value; home values rise 3% a year; selling costs 6%. The renter pays $2,000 a month, rising 3% a year, invests the down payment and closing costs, and also invests each month’s difference between owning and renting costs, earning 5% a year.
In the first month, owning costs about $2,859 versus $2,000 to rent.
| Years | Buyer’s equity after selling costs | Renter’s investment portfolio |
|---|---|---|
| 3 | $55,793 | $83,654 |
| 5 | $86,527 | $110,488 |
| 7 | $119,817 | $137,793 |
| 10 | $175,104 | $178,134 |
Under these assumptions, renting and investing stays slightly ahead for about a decade, and the two are nearly even at year 10. After that, owning tends to pull ahead as the loan balance falls faster and rent keeps rising.
What changes the answer
- Home price growth: at 5% a year instead of 3%, the buyer is ahead after five years ($125,022 vs. $112,632). At 1% a year, the renter is far ahead ($108,437 vs. $50,908).
- Rent level: where rents are high relative to prices, buying wins sooner.
- Interest rate: lower rates help buyers; see what 1% extra interest costs.
- Discipline: the renter only wins if they actually invest the difference. For many people, a mortgage acts as forced savings.
- Time: buying and selling costs make short stays expensive.
Non-financial factors
- Owning gives stability, control over the home and protection from rent increases on principal and interest.
- Renting gives flexibility to move and no responsibility for big repairs.
Make your own comparison
- Find the real rent for a comparable home.
- Calculate the full owning cost with our mortgage calculator, including tax, insurance and PMI.
- Add about 1% of the price per year for maintenance.
- Decide how long you will realistically stay.
- Check your budget with how much house you can afford and your cash needs with down payment and closing costs.
Frequently asked questions
Is it cheaper to rent or buy a house?
It depends on how long you stay, local prices and rents, mortgage rates and how fast home values rise. Buying has high upfront and selling costs, so it usually needs several years to beat renting, and in some markets renting stays cheaper for a decade or more.
How long do I need to stay in a home for buying to make sense?
There is no single number, but because buying and selling costs can total 8% to 10% of the price or more, many buyers need to stay at least five to seven years, and sometimes longer, to come out ahead.
Does renting mean throwing money away?
No. Rent buys housing, just as mortgage interest, property taxes, insurance and maintenance do for owners. The fair comparison is between all the unrecoverable costs of each option.
What should I compare besides the monthly payment?
Down payment and closing costs, what that cash could earn if invested, maintenance, property taxes, insurance, HOA dues, selling costs, and how long you expect to stay.
Sources: CFPB: Buying a House. Model and calculations by ToolStackIA; investment returns and home price growth are assumptions, not guarantees.
This article is for educational purposes only and is not financial advice. Loan programs, rates and rules change; confirm details with your lender or a HUD-approved housing counselor.