Is It Better to Rent or Buy in 2026? The Actual Math
Last updated July 18, 2026
At today’s mortgage rates — Freddie Mac’s weekly survey has put the 30-year average near 6.7% through mid-2026, inside the roughly 6.5–6.9% band it has held all year — renting and investing the difference beats buying in most typical US markets, and the margin isn’t small. In our model’s default scenario ($420,000 home, $2,100/month comparable rent, 20% down at 6.5%, 10-year stay), renting comes out about $67,000 ahead. Buying wins when rent is unusually high relative to price, when your rate is near 5% or below, or both — and the line between those two worlds can be located precisely.
The short answer: renting usually wins at 2026 rates
At a 6.5% mortgage rate and a typical US price-to-rent ratio, renting wins the pure-money contest. Our model’s default scenario — a $420,000 home versus $2,100/month rent, 20% down, 3% home appreciation, 2.5% rent growth, 7% investment return, standard deduction — puts renting ahead by roughly $67,000 over a 10-year stay, taxes and selling costs included.
The mechanism shows up in month one. The mortgage payment looks like a wash against rent; the total cost of owning does not:
| Year-1 monthly cost | Owner | Renter |
|---|---|---|
| Mortgage principal & interest | $2,124 | — |
| Property tax, insurance, maintenance | $943 | — |
| Rent + renter’s insurance | — | $2,115 |
| Total | $3,067 | $2,115 |
The renter keeps roughly $950 a month plus the $84,000 that never went into a down payment, and both compound at the model’s 7% return. Time widens the gap rather than closing it: renting wins by ~$49,000 over a 5-year stay, ~$67,000 over 10 years, and ~$389,000 over 30 — even though the model keeps running after the mortgage is paid off and the owner’s monthly costs fall. At today’s rates, the early-years interest and the forgone investment returns are too large to claw back.
Which three numbers actually decide it?
The verdict hangs on three inputs: the price-to-rent ratio (what a home costs versus what it rents for), your mortgage rate, and how long you stay. Appreciation, rent growth, and investment returns matter too, but in most scenarios they move the margin — these three pick the winner.
1. Price-to-rent ratio. The default home rents for 0.50% of its price per month, a price-to-annual-rent ratio of about 16.7. Our model’s tipping point at 6.5% sits at 0.59% per month: charge more than ~$2,468 rent for that $420,000 house and buying starts to win; below it, renting does. Check your own market with the price-to-rent ratio calculator.
2. Mortgage rate. The tipping point moves fast when rates move. Same house, same 10-year stay, our model:
| 30-year rate | Rent at which buying starts to win | As % of home value per month |
|---|---|---|
| 4% | $1,890 | 0.45% |
| 5% | $2,067 | 0.49% |
| 6% | $2,340 | 0.56% |
| 6.5% | $2,468 | 0.59% |
| 7% | $2,590 | 0.62% |
| 8% | $2,830 | 0.67% |
Read the 6.5% row against the actual $2,100 rent: renting wins with about $370 of monthly headroom. Now read the 4% row: the same rent clears that threshold, and buying wins by ~$38,000 over 10 years with break-even in year 6. Nothing about the house changed. Rates flip everything.
3. How long you stay. Stay length is asymmetric. Short stays punish buyers because purchase and resale costs get spread over too few years — even in the buyer-friendly 4% scenario, break-even doesn’t arrive until year 6. But long stays don’t rescue a losing monthly ledger; they amplify whichever side is already ahead. At 6.5% that’s the renter, whose advantage grows from $49,000 at year 5 to $389,000 at year 30.
When does buying clearly win?
Buying wins decisively in two situations: when mortgage rates are near 5% or below at normal price-to-rent ratios, and in markets where rent runs high relative to price — above roughly 0.6% of the home’s value per month at today’s rates. A long stay amplifies either win but can’t create one by itself.
- High-rent, low-price markets. A $220,000 home renting for $1,600/month is 0.73% per month (price-to-rent ratio ~11.5). Our model has buying winning there over a 10-year stay even at today’s rates, same assumptions otherwise. This profile is common in lower-cost metros where prices never detached from rents.
- Low rates. At 4%, the default scenario flips to buying by ~$38,000. Even 5% tips it — barely — because the threshold rent ($2,067) slides just under the actual rent ($2,100).
- Expensive metros are the mirror image. A $1.1M home renting for $3,800/month is 0.35% per month (ratio ~24). Over a 15-year stay, for a married couple itemizing deductions, our model has renting winning by about $560,000. Full mortgage-interest and SALT deductions do not close a gap that size.
For the full boundary map across rates, ratios, and horizons, see when does buying beat renting.
What does everyone get wrong?
Two errors dominate the debate: comparing the mortgage payment to rent instead of the total cost of owning to rent, and forgetting that a down payment not spent is a portfolio. The first understates the cost of owning by about a third; the second ignores six figures of compounding.
The mortgage is not the cost of owning. $2,124 of principal and interest against $2,100 rent looks like a coin flip. Add property tax, insurance, and maintenance and the owner’s real cost is $3,067 — the payment alone misses about 31% of it. The 5% rule is the popular shorthand for exactly this correction.
The down payment has an opportunity cost. $84,000 that goes into a house stops compounding in the market. At the model’s 7% return it alone would grow to roughly $165,000 in 10 years — before capital-gains tax, which the model charges the renter’s portfolio, so the comparison isn’t rigged. It’s also symmetric: in scenarios where owning is the cheaper monthly option, our model has the owner investing the difference, where most calculators only credit the renter. Details in the methodology.
And the classic renter error: “rent is money thrown away.” Interest, property tax, insurance, maintenance, and selling fees are thrown away too; only the principal slice of a mortgage payment builds equity. The model counts every dollar of that equity — and renting still wins the default 2026 scenario. We take that myth apart in is buying always better than renting.
How much should you trust this?
In the default 6.5% scenario, the verdict is robust: move any single assumption — home appreciation, rent growth, investment return, or the mortgage rate itself — by a full percentage point and renting still wins. Near the boundary it’s fragile: at a 4% rate, one point of appreciation or rate flips the winner.
That’s the honest shape of the answer — a strong prior far from the tipping rents in the table above, a coin flip near them. And the model can’t price everything. It doesn’t know whether you’d actually invest $950 a month with a renter’s discipline (many people wouldn’t, and a mortgage is forced savings). It doesn’t price the buyer’s one-way option to refinance if rates fall, the risk of a landlord selling your home out from under you, or what it’s worth to paint your own walls. It does price what’s priceable: 2026 US taxes (standard-versus-itemized, the $40,400 SALT cap, the $750,000 mortgage-interest cap, the Section 121 home-sale exclusion), PMI with automatic cancellation, and full selling costs. Outside the US, the calculator is currency-agnostic and every tax input can be set to zero. One last dose of humility: 3% appreciation is an assumption, not a floor, and leverage magnifies home-price moves in both directions.
Run your own numbers
The defaults above describe a deliberately typical American purchase; you live somewhere specific. Open the calculator prefilled with this guide’s scenario, swap in your price, your rent, your rate, and your horizon, and watch which of the three numbers flips your verdict. It takes about two minutes, and every formula behind the result is documented.
Run your own numbers: the calculator recomputes all of this live for your exact scenario — and the methodology page documents every formula it uses.