Lower and The TW Team
Rent vs Buy Calculator
Rent or buy

Rent or buy?

Comparing a rent cheque with a mortgage payment answers the wrong question, and it is wrong in the same direction every time. This compares what you are worth in the end, counting what your down payment would have earned invested instead, the cost of selling, and the fact that for most buyers since 2018 the mortgage interest deduction is worth exactly nothing.

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An estimate from your figures, not advice, and not an offer of credit.

Your Scenario

Compare like with like. The house and the rental should be places you would actually be equally happy in, or the answer is meaningless.

An example figure, not our pricing.

Owning costs

Both as a percentage of the home’s value each year, so both grow with it. The 1% maintenance convention is a rule of thumb, not a measured figure, studies put housing depreciation anywhere from 0.7% to 2.5% a year, and it runs higher on older houses.

Drops off automatically at 78% of the original value.

Transaction costs and what the market does

Selling costs are the reason a short stay almost never wins. Commission on both sides, transfer tax, title, concessions. Since August 2024 the buyer’s agent’s compensation is separately negotiated, so this figure varies more than it used to.

A year, nominal. These are assumptions, not forecasts, long-run real house price growth is genuinely disputed among economists, and local markets diverge from national averages far more than either number suggests.

What the renter earns on the down payment they did not spend. This is the most powerful single input on the page, and the one ordinary calculators leave out entirely.

Your tax situation

Charitable giving, medical above the floor, anything else you would itemise. It matters, because it decides whether your mortgage interest clears the standard deduction at all.

The Mortgage Interest Deduction

To you, in year one
,

Your itemised total,
Standard deduction,
Property tax cap,
Actually worth,

Where You End Up

Total wealth on each path after 7 years, with both sides spending the same each year and the cheaper one investing the difference.

If you buy,
If you rent,
Difference,
Your equity,
Cost to sell,
Renter’s portfolio,

Year By Year

The crossover is where the last column turns positive. Before it, the cost of buying and selling has not been earned back.

Own, monthlyRent, monthlyTax benefit Wealth if buyingWealth if rentingDifference
Reference

Why this answer differs from the one you have seen

Five things ordinary rent-versus-buy calculators leave out, and every one of them tilts the answer toward buying.

The question is wealth, not payment

“My mortgage would be less than my rent” is not an argument, because a mortgage payment is not a cost. Part of it is a transfer into your own equity, and part of it is interest that is gone forever. Meanwhile a renter who does not buy is holding a large pile of cash that a buyer just handed over.

So the right question is: in N years, what am I worth on each path? For the buyer that is the home’s value, less the loan, less the cost of selling, less any capital gains tax. For the renter it is the portfolio built from the down payment they did not spend, plus every month they paid less than the owner did.

Both sides here spend the same amount every year, and whoever is cheaper invests the difference. Letting one side quietly consume more than the other is the second most common way these models cheat.

The down payment is not free

The single largest error in ordinary calculators. Money spent on a down payment and closing costs is money that is not in a brokerage account compounding, and over a long horizon that foregone return is enormous.

On these figures, the buyer hands over the down payment plus closing costs on day one. The renter still has it. At 7% less tax, that grows on its own before a single monthly difference is added.

This is also why the investment return assumption is the most powerful input on the page, and why any calculator that omits it has effectively set that return to zero and told you buying wins.

Selling costs set the floor

Buying costs roughly 2–3% of the price. Selling costs roughly 7–9%, commission on both sides, transfer tax, title, and whatever concessions the buyer extracts. Round trip, call it 10%.

That is the hurdle appreciation and equity have to clear before buying is even level, and it is why a stay of under about four to six years rarely wins on wealth at any plausible appreciation rate. It is a fixed toll, not a rate, so a short holding period cannot amortise it.

One thing that changed recently: since August 2024 the buyer’s agent’s compensation is separately negotiated rather than published on the listing service, so this number varies by deal more than it used to.

The tax benefit is usually zero

This is the correction that most often flips the answer, and it is the one nearly every calculator gets wrong.

The mortgage interest deduction is not worth your interest times your tax rate. It is worth the amount by which itemising beats the standard deduction, times your marginal rate. For a married couple in 2026 the standard deduction is $32,200. Total itemised deductions have to clear that before the first dollar of mortgage interest is worth anything at all.

A $520,000 loan at 6.5% throws off about $33,600 of interest in year one. Add $7,000 of property tax and you are at $40,600, so only $8,400 is marginal, worth about $2,000 at 24%, not the $8,000 a naive model reports. And it shrinks every year, as interest falls and the standard deduction is indexed upward. This page computes it year by year for exactly that reason.

What the caps actually are in 2026

Two figures that changed recently and that most sources still have wrong.

Mortgage interest is deductible on up to $750,000 of acquisition debt, and this is now permanent, legislation enacted in July 2025 made it so. It does not revert to $1,000,000. Loans taken out on or before 15 December 2017 keep a $1,000,000 grandfather.

The state and local tax cap is not $10,000. It is $40,000 for 2025 and $40,400 for 2026, rising about 1% a year, and then falling back to $10,000 in 2030. That reversion is current law, and if your horizon crosses it this page applies it. It is also an obvious candidate for future legislation, so treat it as scheduled rather than certain.

Maintenance, honestly

The “1% of value a year” convention has no rigorous empirical basis. It is a rule of thumb that happens to be roughly the right order of magnitude.

The academic work on housing depreciation, the closest measurable proxy, disagrees substantially: estimates run from about 0.7% a year in one large county-level study to about 2.5% in a repeat-sales model, with roughly 0.5 points of that attributable to maintenance spending. What every study does agree on is that it falls with the age of the house as a share of value, new homes cost the most to maintain relative to what they are worth.

It is also lumpy in a way the model smooths: a roof, a furnace, a sewer line. And there is an asymmetry worth noticing, an older, cheaper house has higher maintenance as a percentage of value, so the cheap option is not as cheap as it looks.

Capital gains when you sell

Under IRC §121, gain on a principal residence is excluded up to $250,000 single or $500,000 married filing jointly, provided you owned and lived in it for two of the five years before the sale.

Those amounts are not indexed for inflation and have not moved since 1997, which in expensive markets over a long horizon is increasingly binding. This page applies the exclusion and taxes anything above it at 15%.

There is an asymmetry here that favours owning and that a fair model has to show: the owner’s gain is largely tax-free, while the renter’s portfolio is taxed along the way. A model that taxes neither, or only one, has its thumb on the scale.

Appreciation is a genuine argument

Do not treat any number here as a forecast, including ours. Long-run real house price growth is disputed among economists who have spent careers on it: Robert Shiller’s index implies almost none, around 0.3–0.4% a year above inflation, while a reconstruction by Federal Reserve Bank of Philadelphia researchers concludes it is closer to 1.3% and argues the older series understates it badly.

That is a difference of a factor of three or four in the assumption doing the most work in your answer. A defensible default is inflation plus half a point to a point, roughly 3% to 4% nominal, but reasonable people put it elsewhere.

Which is why the more useful output is the break-even appreciation rate this page computes: not “buying wins” but “buying wins if homes do better than X”. That reframes a prediction as a condition you can judge.

What swings the answer

In rough order of force:

  1. The gap between your investment return and home appreciation. Dominates everything at long horizons.
  2. Round-trip transaction costs. Set the minimum holding period almost single-handedly.
  3. The rent-to-price ratio where you live. $3,200 against a $650,000 house and against a $1,100,000 house are opposite answers.
  4. The mortgage rate, which drives both the payment and the share of it that never becomes equity.
  5. Rent growth, which compounds and so matters more the longer you stay.
  6. Property tax and maintenance rates, which vary enormously by state and are pure carry.
  7. The tax benefit, much smaller than most people expect, and zero for the majority.

What this deliberately ignores

Everything that is real and not monetisable, and it cuts both ways.

For owning: security of tenure, the freedom to change the place, and the forced-savings discipline of a mortgage, which is worth a great deal to people who would not otherwise invest the difference, and this model assumes you would. If you know you would not, the model overstates renting.

For renting: mobility, the ability to take a job in another city without a 9% exit toll, no exposure to a single undiversified asset in a single postcode, and no responsibility for the roof.

A wealth model cannot price any of that. It is not a complete answer to the question, only the financial part of it.

Comparing like with like

The most common way people fool themselves here is not arithmetic, it is the comparison. A $3,200 apartment and a $650,000 house are frequently not the same amount of housing.

If the house you are pricing is bigger, newer or better located than the flat you are renting, you are not comparing renting with buying, you are comparing your current life with a better one, and buying will win that comparison whatever the arithmetic says.

Price the rental you would actually take instead, or the house you would actually buy. Not one of each.

A note on the break-even year

The year the last column turns positive is the point at which buying has earned back the cost of getting in and out. Read the slope around it as well as the year itself: if the difference is crawling across zero, the answer is fragile and small changes in your assumptions will move it years in either direction.

If it crosses steeply, the answer is robust. Either way, a single number implies a precision this model does not have, change the appreciation and return assumptions to a pessimistic and an optimistic case and see how wide the band is before you decide anything.

Questions

What people actually ask

Is it better to rent or buy?

It depends on how long you stay, the rent-to-price ratio where you live, and the gap between what your money would earn invested and what homes appreciate. Below about four to six years, buying rarely wins on wealth, because selling costs 7–9% of the value and that toll cannot be amortised over a short stay. Beyond that it turns on the assumptions, which is why this page shows the break-even appreciation rate rather than just an answer.

How long do I need to stay for buying to make sense?

Long enough to earn back roughly 10% of the value in round-trip transaction costs, plus the difference between carrying a house and renting one. On typical assumptions that is four to seven years, but it moves a lot with the rent-to-price ratio in your market. The year-by-year table on this page shows exactly where your crossover falls.

Does the mortgage interest deduction save me money?

For most buyers since 2018, no. It is worth only the amount by which your itemised deductions exceed the standard deduction, times your marginal rate. In 2026 a married couple needs to clear $32,200 in total itemised deductions before the first dollar of mortgage interest is worth anything. Many buyers never clear it, and those who do get far less than the full interest bill times their rate.

Is the SALT cap still $10,000?

No. It is $40,000 for 2025 and $40,400 for 2026, rising about 1% a year through 2029, and then scheduled to drop back to $10,000 in 2030. That reversion is current law and this page applies it if your horizon reaches it, though it is an obvious candidate for future legislation.

Did the mortgage interest limit go back to $1 million?

No. The $750,000 acquisition debt limit was made permanent by legislation enacted in July 2025. Loans taken out on or before 15 December 2017 keep the older $1,000,000 limit, but a loan taken today is capped at $750,000 of deductible acquisition debt.

Why does this say renting wins when my mortgage would be cheaper?

Because a mortgage payment is not the cost of owning. Add property tax, insurance and maintenance, subtract the part of the payment that is really savings, and then account for the down payment you would otherwise have invested and the 7–9% it costs to sell. Those four adjustments frequently reverse a comparison that looked obvious.

What should I assume for appreciation?

Something between inflation and inflation plus a point, roughly 3% to 4% nominal, but treat any figure as contested. Economists disagree by a factor of three or four about long-run real house price growth, and local markets diverge from national averages far more than that. The more useful output is the break-even rate: what homes would have to do for buying to win on your other assumptions.

How much should I budget for maintenance?

1% of the home’s value a year is the convention and a reasonable midpoint, but it is a rule of thumb rather than a measured figure. Studies of housing depreciation put it anywhere from 0.7% to 2.5%, and it runs higher on older houses as a share of value. Budget for it as lumpy, not monthly, the roof arrives all at once.

Do I pay tax when I sell my house?

Usually not. Under IRC §121 you can exclude up to $250,000 of gain, or $500,000 filing jointly, if you owned and lived in the home for two of the five years before selling. Those amounts have not changed since 1997 and are not indexed to inflation, so in expensive markets over a long hold they can start to bind.

Is buying a good investment?

It is a leveraged, undiversified, illiquid bet on one property in one postcode, with substantial carrying costs and a 9% exit fee, which also happens to be somewhere to live, comes with a large tax exclusion on the gain, and forces you to save. Whether that is a good investment depends on the alternative you would actually pursue, not on the one in a spreadsheet.

What if I would not actually invest the difference?

Then this model overstates the case for renting, and you should say so honestly to yourself. The forced savings built into a mortgage is worth real money to people who would otherwise spend the difference, and it is the strongest non-financial argument for buying. The model assumes a disciplined renter because that is the only assumption it can compute; you know whether it describes you.

Why is my break-even so sensitive?

Because it is a difference between two large numbers that grow at different rates. If the wealth gap crawls across zero, small changes in appreciation or investment return move the crossing by years. Run a pessimistic and an optimistic case and look at the width of the band, if the answer flips inside a plausible range, the honest conclusion is that it is close, and the non-financial factors should decide it.

Important disclosures

Taylor Weiner, mortgage loan originator, NMLS #263090  ·  Lower, LLC, NMLS #1124061  ·  5950 Symphony Woods Road, Suite 312, Columbia, MD 21044  ·  (714) 658-4912  ·  tweiner@twteam.com  ·  Verify licensing at nmlsconsumeraccess.org. Licensed to originate residential mortgage loans in California.

Not a government agency. The TW Team at Lower is not affiliated with, acting on behalf of, or endorsed by HUD, the FHA, the VA, the USDA, the FHFA, Fannie Mae, Freddie Mac or any other government agency. This page is not a government publication and has not been reviewed or approved by HUD, by the FHA, by the VA, by the USDA or by any other government agency. FHA loans are insured by the Federal Housing Administration and VA loans are guaranteed by the Department of Veterans Affairs; both are originated by approved lenders, not by the agencies themselves.

This calculator is an educational estimate based on figures and assumptions you enter. It is not a rate quote, an offer of credit, a commitment to lend, tax advice, or investment advice. No rate on this page is offered or available; every rate field opens on an example figure you are expected to replace, and nothing on the page adjusts one.

Several inputs here are genuinely uncertain and the answer is sensitive to them, future home appreciation, rent growth and investment returns above all. Nothing on this page is a forecast of any of them. Long-run housing returns are disputed among economists, and local markets diverge from national averages far more than these assumptions suggest.

Where the tax figures come from

Standard deduction for tax year 2026, from IRS Revenue Procedure 2025-32: $16,100 single and married filing separately; $32,200 married filing jointly; $24,150 head of household. Permanent and inflation-indexed.

Mortgage interest: IRC §163(h)(3) and IRS Publication 936. The $750,000 acquisition debt limit ($375,000 married filing separately) was made permanent by P.L. 119-21 §70108, enacted 4 July 2025, together with the disallowance of home equity indebtedness interest not used to buy, build or substantially improve the securing home. Debt incurred on or before 15 December 2017 retains a $1,000,000 limit, which this page does not model.

State and local taxes: IRC §164(b)(6) and (7). $40,000 for 2025; $40,400 for 2026; 101% of the prior year for 2027 through 2029; $10,000 from 2030. A phase-down applies above $505,000 of modified adjusted gross income for tax year 2026 (the threshold is indexed; $500,000 was the 2025 figure), reducing the cap by 30% of the excess but never below $10,000. It is not modelled here.

Capital gains on a principal residence: IRC §121, $250,000, or $500,000 on a joint return, where the ownership and use tests are met for two of the five years before sale. Not indexed for inflation.

A new limitation on itemised deductions under IRC §68(a) takes effect for tax years beginning after 31 December 2025 and reduces the value of itemised deductions for taxpayers in the top bracket. It is not modelled here.

Maintenance and depreciation estimates are drawn from the published literature on housing depreciation, which does not agree with itself; see the reference section.

Scope and limits of this calculator

No annual percentage rate is shown, and that is deliberate. The rate field here is an assumption you supply so the page has something to amortise, not a quote. An APR is a disclosure about a specific loan with a specific fee sheet, and this page has neither, it never asks what your closing costs are, because the answer would not change whether renting or buying builds more wealth. Your Loan Estimate carries the APR that governs.

This page models a fixed-rate mortgage on a single property held for a stated number of years and then sold. It does not model an adjustable rate, refinancing, moving and buying again, renting out part of the property, a state income tax deduction interacting with the federal cap, the alternative minimum tax, the §68(a) limitation on itemised deductions, the SALT phase-down above $505,000 of income, the $1,000,000 grandfathered acquisition debt limit, or inflation as a separate variable from the growth rates you enter.

It assumes the renter invests the entire difference every month and never spends it, and that both paths otherwise consume the same amount of housing. Both assumptions flatter renting to the extent they are untrue of you.

Tax treatment depends on facts this page does not know. Talk to your tax adviser before relying on any of it.

Tax figures current for tax year 2026.

⌂ Equal Housing Opportunity. Lower, LLC is an Equal Housing Lender. We do business in accordance with the Federal Fair Housing Act and the Equal Credit Opportunity Act.