The true cost of homeownership in 2026
The mortgage payment is only the beginning. Property taxes, homeowner's insurance, HOA dues, and maintenance together add up to 2–4% of home value per year in ongoing costs. On a $450,000 home, that's $9,000 to $18,000 annually before you touch the mortgage.
When buyers compare their monthly mortgage payment to their monthly rent, they almost always undercount. The fair comparison is the all-in monthly cost of ownership, including property tax (typically $350–$600/month on a $450k home at 1.1%), insurance ($125–$175/month), HOA ($0–$400+/month), and maintenance reserve ($375–$750/month). Add those to a $2,990 mortgage payment at 7% on a $360k loan and you're looking at $4,000–$5,000 all-in.
The opportunity cost of your down payment
A 20% down payment is a large sum invested in an illiquid, undiversified asset. On a $450k home that's $90,000, money that can't be in the stock market.
Invested at 7%/year, $90,000 becomes roughly $127k in five years, $177k in ten, and $354k in twenty, before taxes. This compounding doesn't stop. Every year you own the home, you're forgoing that return on the equity you've built. The opportunity cost is real and relentless.
This is why high-investment-return assumptions shift the rent-vs-buy calculation so dramatically toward renting. It's also why financially disciplined renters (who actually invest their savings) often accumulate more wealth than homeowners in comparable price ranges, at least over 5–10 year windows.
How to find your personal break-even year
The break-even year is the first year where the buyer's net wealth (equity after selling costs, minus all cash spent) exceeds the renter's net wealth (portfolio balance minus all rent paid). Before that year, renting leaves you better off. After it, buying does.
Your break-even depends on four levers more than anything else: the spread between home appreciation and investment returns, the size of your selling cost, your local property tax rate, and how much your rent would have been versus the all-in ownership cost. Tinker with all four in the calculator.
At 7% mortgage rates with a 6% selling cost, most buyers in average US markets break even somewhere between year 5 and year 9. In high-appreciation markets it can be as short as year 3. In slow-growth markets with high property taxes, it may never arrive.
The 5% rule: a one-minute rent-vs-buy screen
Ben Felix popularized a back-of-envelope rule: multiply the home price by 5%, then divide by 12. If your monthly rent is below that number, renting is roughly competitive. If it's above, buying may be worth a closer look.
The 5% breaks down as follows: 3% for the opportunity cost of equity tied up in the home (using a 7% investment return minus 4% in foregone borrowing rate), 1% for unrecoverable costs of ownership (maintenance, insurance), and 1% for property tax. It's a useful screen, not a verdict.
For a $450,000 home: 5% × $450k ÷ 12 = $1,875/month. If comparable rentals in your area cost $2,400/month, the 5% rule says buying deserves a closer look. If rentals run $1,600/month, renting wins the screen. The full simulation in this calculator will give you a more precise answer.
When buying makes unambiguous financial sense
Buying makes strong financial sense when: (1) you plan to stay at least 7–10 years, (2) you have a 20% down payment, (3) local rents are high relative to home prices, (4) home appreciation is expected to track or beat long-term averages, and (5) your marginal tax rate is high enough to make the mortgage interest deduction meaningful.
It also makes sense when you value stability and ownership so highly that you'd choose it even at a moderate financial disadvantage; the non-financial value of owning your home is real. The calculator tells you the cost of that choice so you can make it knowingly.
Common mistakes in rent-vs-buy analysis
- Comparing the mortgage payment alone to rent, ignoring property tax, insurance, HOA, and maintenance.
- Forgetting selling costs. A 6% selling cost on a $500k home is $30,000, a meaningful hurdle that takes years of appreciation to overcome.
- Assuming the renter does nothing with the saved money. The rent-vs-buy math only favors renting if you actually invest the difference.
- Using wishful appreciation assumptions. 6–8%/year appreciation has happened in hot markets, but the long-run US average is closer to 3–4%.
- Ignoring rent inflation. Rents in most US cities have risen 3–5% annually over the past decade; a flat-rent assumption makes renting look cheaper than it really is long-term.
- Deciding purely on finances. Intangible factors (stability, pets allowed, renovation freedom, school district locking) are real and should be in the decision.
