Rent vs buy: what goes into the comparison

What goes into the comparison

Costs of buying

• Mortgage payment. Only the interest part is a cost you do not recover. The principal part builds your equity.
• Property tax and homeowners insurance. FHA counts both in the housing payment, along with flood insurance when required, mortgage insurance premium, association dues, ground rent and special assessments (Handbook 4000.1).
• Maintenance and repairs. No official source gives a typical amount, so use your own estimate.
• Money tied up in the purchase. Your down payment and closing costs could earn interest elsewhere. The CFPB notes that money put into a home is hard to get back, because borrowing against equity generally requires years of ownership and equity.
• Costs of selling later. A sale carries its own costs, such as agent commission.

Costs of renting

• Rent, renter’s insurance, and any utilities the landlord does not include.

Taxes. Mortgage interest is deductible only if you file Form 1040 and itemize on Schedule A, and only on the first $750,000 of home acquisition debt for loans taken out after December 15, 2017 (Publication 936 for 2025). The IRS reports a combined limit of $40,000 for state and local income, sales and property taxes on 2025 returns (Publication 530). If your itemized deductions do not exceed your standard deduction, these deductions give you nothing extra. See mortgage interest deduction and property tax deduction.

Using HUD Fair Market Rent as the rent side

HUD’s rule (24 CFR 888.113) defines FMRs as “estimates of rent plus the cost of utilities, except telephone.” They are set at the 40th percentile: “the dollar amount below which the rent for 40 percent of standard quality rental housing units fall.” The distribution comes from units occupied by recent movers, with public housing and substandard units removed. HUD generally will not set an FMR below 90 percent of the previous year’s.

The Federal Register notice says HUD must publish FMRs at least annually, effective October 1. FY2027 figures therefore apply from October 1, 2026.

Limits to keep in mind. An FMR is a program benchmark for rent assistance, not a quote for any building. It covers standard-quality units, it includes utilities, and it is set for a metro area or county, not a neighborhood. If you are comparing a specific listing, use that listing’s rent. Payotte’s rent vs buy calculator uses the county’s FY2027 two- or three-bedroom FMR when you do not enter a rent.

Example with assumed numbers

These figures are for illustration only. Suppose a $300,000 loan at an assumed 6 percent over 30 years (principal and interest $1,799 a month), and rent of $2,200 for a similar home.

In this example, owning costs $80 a month more than renting before counting the return you could earn on your down payment and closing costs. Month-1 interest falls as principal is repaid. This guide makes no forecast of home prices or rents, and the result depends on how long you stay and what your home is worth when you leave. The same table works with your own numbers.

How long you plan to stay

Buying carries costs at both ends: closing costs when you buy and selling costs when you leave. Renting does not. The longer you stay, the more months you have to spread those one-time costs across, so the comparison depends on your own timeline. Divide your one-time costs by the monthly gap between owning and renting to see how many months it takes to recover them. In the example above, that gap is small, which would make the answer sensitive to your estimates of upkeep and of what your down payment could earn elsewhere. Re-run the numbers with quotes: your Loan Estimate shows actual closing costs, and your insurance and tax bills show the rest.

Where states differ

Property tax, insurance, association dues and closing costs vary by state and county, so the answer differs from place to place. Compare them in property tax by state and closing costs by state, or see the cost of buying a home. The mortgage calculator turns a price and rate into a payment.