Rent vs buy: which builds more wealth?
A year-by-year, apples-to-apples comparison. The renter invests what the buyer spends upfront; the buyer builds equity. Change any assumption and watch the lines move.
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After –, by –. : –. If you stayed 30 years: –.
Buy net worth – Rent net worth –
Owning costs about –/mo in year one (including utilities) vs rent of –. Cash needed upfront: –. Tax benefit from itemizing in year one: –.
Estimates only. Not financial advice. Terms
Sterling says: Tallying it all up…
Year-by-year table
| Year | Buy net worth | Rent net worth | Buy − Rent |
|---|
What the default numbers say
With these defaults and U.S. medians (a $360,600 home vs $1,677/mo rent for a 3-bedroom, 7.32% rate), buying does not catch up within 30 years: renting ahead by $111,711 after 10 years, renting ahead by $198,169 after 20 and renting ahead by $387,082 after 30. That is an output of the assumptions, not a prediction. The biggest levers are the mortgage rate, the investment return, how fast prices grow versus rents, and the local price-to-rent ratio. Try a 6% rate or a 4% return to see how quickly the answer moves.
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Questions people ask
Is it better to rent or buy?
It depends mostly on how long you’ll stay, the price-to-rent ratio where you live, your mortgage rate, and what you’d earn investing the cash instead. Buying has big upfront and exit costs (closing costs, selling costs), so it usually needs years to pull ahead, and at high rates or high price-to-rent ratios it may not pull ahead at all.
How does this rent vs buy calculator work?
It simulates each month. Both households spend the same amount of cash: the buyer pays every owning cost (mortgage, PMI, property tax, insurance, HOA, maintenance and utilities); the renter pays rent including utilities and invests the down payment, closing costs and any monthly savings at your chosen return. Whenever owning is cheaper than renting (for example after the loan is paid off), the buyer invests the difference instead. Each year we compare net worth as if both cashed out: the home sold minus selling costs and the remaining loan, minus capital-gains tax on investment gains and on any home gain above the home-sale exclusion.
Does it include the mortgage interest deduction?
Yes, honestly: itemizing only helps by the amount your mortgage interest plus property tax exceed the standard deduction ($32,200 for married couples filing jointly in 2026, $16,100 for single filers). With today’s standard deduction many buyers get little or no benefit, so the default often shows $0. The SALT cap and your other deductions aren’t modeled. Set the tax bracket to 0 to leave the deduction out.
Where do the default assumptions come from?
Home appreciation (4.3%/yr) is the long-run growth of the FHFA House Price Index since 1991; rent growth (3.3%/yr) and general inflation (2.6%/yr) are BLS CPI figures over the same years; the default rent is the Census median gross rent for a 3-bedroom, since the typical owned home is about that size; selling costs (7%) reflect average agent commissions plus seller closing costs. Owner utilities ($275/mo) are the Census median that owners of 3-bedroom homes pay for electricity, gas, water and other fuel. The 6% investment return is our assumption. Every one is editable, and past growth doesn’t guarantee future growth.
What is the breakeven year?
The first year in which the buyer’s cash-out net worth (home equity after selling costs and taxes, plus any invested savings) is at least the renter’s after-tax portfolio. If buying never catches up during your stay, we say so.