Is renting really throwing money away? The costs owners don't count

By DecisionSheet · Updated September 22, 2026 · 2026 tax figures

Rent pays for a place to live and nothing else; none of it comes back. The same is true of much of what an owner pays. Mortgage interest, property tax, insurance, HOA dues and maintenance buy the use of the home and build no equity (the part of the home's value the owner holds outright). Only the principal repaid, and any rise in the home's price, add to it.

DecisionSheet's rent vs. buy calculator tracks both households month by month. With its default inputs, a $550,000 home against $2,400 a month in rent, the owner's no-equity costs in year 1 are $43,245. The renter pays $29,050 in rent and insurance (open this scenario).

What each household's money buys

The owner pays 20% down, borrows the rest over 30 years at 6.5%, and pays property tax at 1.1% of the home's value, a 1% maintenance reserve, $1,800 a year of insurance and $120 a month in HOA dues. The renter pays rent plus $250 a year of renter's insurance. The table splits each household's annual outflow in the model and adds, for the owner, the year's rise in the home's value.

In both years the owner's no-equity costs are larger than the renter's rent and insurance, and interest is the largest single piece. Between year 1 and year 10, interest falls while property tax, maintenance, insurance and HOA dues all rise with the home's value and inflation; the owner's no-equity total rises from $43,245 to $44,347. Rent and insurance rise from $29,050 to $39,564. The gap between the two narrows from $14,195 to $4,783.

The owner's side of the ledger also has gains. Principal repaid is the owner's own money moved into the home. The rise in value, $19,250 in year 1 at the assumed 3.5% a year, is a paper gain until a sale. The model values the owner as if selling at each year-end and deducts 6% of the whole home value, $34,155 at the end of year 1, more than that year's rise. Two more costs sit outside the table: $16,500 of closing costs paid once at purchase, and the growth the owner's cash gives up.

The down payment as an investment

The owner puts $126,500 into the purchase: the $110,000 down payment and $16,500 of closing costs. The model has the renter invest that same sum instead, at an assumed 8% a year. That return is an assumption, not a forecast; the model applies it every year with no losses. On that assumption the sum alone would earn $10,120 in year 1, a cost of owning that appears on no bill. By year 10 it would be worth $273,104.

The model also has the renter invest, each month, whatever the owner pays beyond the rent. At year 10 the renter's account holds $526,322: the grown upfront sum plus $253,218 from those monthly differences and their growth. The owner's equity at that point is $402,814 before a sale and $356,265 after the selling cost, and the owner has no investment account yet. The upfront sum alone, $273,104, would trail the owner's $356,265.

Counting only the money that is gone

Add up every dollar that builds nothing. For the renter that is all rent and insurance. For the owner it is closing costs, interest, tax, insurance, HOA dues, maintenance and, in the model's running total, the selling cost of a sale that year. On the defaults the renter's running total passes the owner's only in year 28: $1,343,135 against $1,323,649.

That tally still leaves out the investment side. In the same year 28 the renter is ahead in net worth by $1,083,518, and the renter is ahead in every one of the 30 years, finishing $1,305,818 in front. In this model the renter's net worth is the invested account and nothing else, so the renter's lead depends on investing every dollar the owner spends beyond the rent.

When the owner does come out ahead

The default case is one set of assumptions, not a verdict on owning. Change one input and the model's answer changes.

• A higher rent for the same home. At $3,500 a month, the renter's year-1 rent and insurance are $42,250, against the owner's $43,245 of no-equity costs, a difference of $995. The owner's net worth passes the renter's in year 6 and stays ahead, finishing $899,525 in front at year 30 (open this scenario).
• A lower return on the renter's investments. At the default rent but a 5% return, the owner passes the renter in year 23 and finishes $146,666 ahead (open this scenario).

Neither side's spending is "wasted" in the model. Each household pays for housing. The owner also pays transaction costs and holds a home the model grows at a fixed rate; the renter holds a portfolio that has to be built and left invested. Which ends ahead turns on the inputs: above, the rent and the return each move it on their own.

Assumptions and limits

• The model is pre-tax. It does not apply the mortgage interest deduction, which is available only to those who itemize (IRS Publication 936). It does not tax the renter's investment gains, or the gain on the home sale; a sale of a main home can exclude up to $250,000 of gain, or $500,000 on a joint return, if ownership and use tests are met (IRS Topic 701).
• The renter invests the whole upfront sum and every month's difference at a constant return. The model does not cover a renter who spends it.
• Home value and rent grow at fixed rates; insurance and HOA dues at 2.5% a year. Property tax and maintenance are percentages of the current home value.
• No private mortgage insurance, refinancing, or major repair beyond the maintenance reserve.

Method and sources

The model is calculateRentVsBuy in the rent vs. buy calculator. It reports each year's total outflow and a running total of unrecoverable costs; the split in the table is rebuilt from the model's own loan balances and home values and checked against both of those totals at build time. Every figure is the model's output for the inputs in the scenario links. The companion guide, How long do you have to stay for buying to beat renting?, follows the crossover year.

• IRS Publication 936, Home Mortgage Interest Deduction: home mortgage interest is deductible only when deductions are itemized on Schedule A.
• IRS Topic 701, Sale of your home: the $250,000 and $500,000 exclusions and the two-of-five-years ownership and use tests.

Open this scenario in the calculator

All figures on this page come from the Rent vs. Buy calculator. Change any input there and the numbers update.