The honest answer to "should I rent or buy?" isn't a slogan — it's a number of years. At today's 6.5% mortgage rates, buying a typical $400,000 home costs about $870 a month more than renting in the first year. The real question is how long it takes for that gap to pay you back.
With 2026's default conditions — a $400,000 home, 20% down, a 6.5% mortgage, and a conservative 4% return on money you'd otherwise invest — buying breaks even around year 12. Stay longer than that and buying generally builds more wealth. Sell before it, and renting usually leaves you better off once you account for the cost of buying and selling.
That's later than the "five to seven years" rule you've probably heard. The older rule isn't wrong so much as incomplete: it ignores what a renter does with the cash they didn't sink into a down payment.
Break-even is the year your wealth as a buyer overtakes your wealth as a renter. As a buyer, your wealth is the equity you'd walk away with if you sold — the home's value minus selling costs and whatever's left on the mortgage. As a renter, your wealth is the investment account you could grow by putting your down payment, and every dollar you save on monthly housing, into the market instead.
Before break-even, the renter is ahead. After it, the buyer pulls in front and keeps widening the lead, because the mortgage payment is frozen while rent keeps climbing.
Three things make the first few years expensive for buyers. Early mortgage payments are almost entirely interest, so you build very little equity. You pay roughly 2.5% of the purchase price in closing costs the day you buy. And you take on maintenance, property tax, and insurance that a renter never sees. Add it up and a $400,000 purchase runs about $870 a month more than renting a comparable place — money that mostly isn't going toward ownership yet.
Most rent-vs-buy calculators quietly assume you do nothing with the money you save by renting. That single hidden assumption is what makes buying look like an obvious win. Change it, and the whole picture moves:
| Assumed investment return | Buying breaks even at… |
|---|---|
| 4% per year | Around year 12 |
| 5% per year | Around year 17 |
| 6%+ per year | Renting wins for all 30 years |
At returns near the long-run stock market average, a disciplined renter who invests the difference can come out ahead indefinitely. That's the math behind the idea that renting isn't "throwing money away" — it's only wasteful if you spend the savings instead of investing them.
The catch: this only holds if you actually invest the difference, every month, for years. Most people don't. A mortgage is forced savings; an investment plan you have to maintain by willpower often isn't. That behavioral edge is a real, if unglamorous, point in buying's favor.
Strip away the noise and it comes down to two questions. How long will you stay? Under about seven years, renting almost always wins after transaction costs. Over a decade or so, buying usually pulls ahead. What will you do with the savings? If you'll invest them at market-like returns, the case for buying weakens sharply. If they'll just get spent, buying's forced-savings effect tilts things back.
If you're confident you'll stay 10+ years and you're not a committed investor, buy. If you might move within five to seven years, or you'll reliably invest the difference, rent and invest. Everyone in between should run their own numbers — small changes in rent, price, or return swing the answer by years.
Run your own numbers free Adjust the price, rent, rate, and investment return — no email requiredIt depends mainly on how long you'll stay and what return you could earn by investing instead. At 6.5% mortgage rates with a 4% investment return, buying a $400,000 home breaks even around year 12. If you'll move within about seven years, renting is usually cheaper after transaction costs. If you'll stay well over a decade, buying typically builds more wealth.
With 2026 default assumptions and a conservative 4% investment return, buying a $400,000 home overtakes renting around year 12. At a 5% return it takes closer to 17 years, and at 6% or higher renting can win for the full 30 years. The break-even is later than the often-quoted five to seven years because that older rule ignores the return a renter earns on the money they didn't spend on a down payment.
In year one, a $400,000 home at 6.5% costs roughly $870 per month more than renting once you add mortgage principal and interest, property tax, insurance, and maintenance. Early mortgage payments are mostly interest, which builds little equity, and you also pay around 2.5% in closing costs upfront. The gap shrinks over time as rent rises while the fixed mortgage payment stays flat.