"Rent is throwing money away." You've likely heard this for years, but in the 2026 housing market, that old advice can be a dangerous oversimplification. To know if you should buy or rent, you have to look at the unrecoverable costs of both options.
The Unrecoverable Costs
Every month, you lose money regardless of whether you rent or own. The goal is to minimize that loss.
🏢 Renting Losses
- Total Monthly Rent
- No equity gain
- No tax benefits
- Exposure to rent hikes
🏡 Buying Losses
- Mortgage Interest
- Property Taxes
- Maintenance (1%/year)
- Only the "Principal" part of your payment is savings.
The Rule of 5%
A quick way to estimate the unrecoverable cost of homeownership is the 5% Rule. Take the value of the home, multiply it by 5%, and divide by 12. If you can rent a similar home for less than that number, renting is mathematically superior.
Example Calculation:
A $500,000 home has an unrecoverable cost of approximately $2,083/month (5% per year).
Compare the Total Cost
Use our Mortgage Calculator to see exactly how much of your monthly payment goes to interest vs. principal.
Opportunity Cost: The Forgotten Factor
When you buy a house, you lock up a massive amount of cash in a down payment. If you had kept that $100,000 in a High-Yield Savings Account or the stock market, what would it be worth in 10 years? This "Opportunity Cost" is the most ignored expense in real estate.
The Verdict for 2026
Buying is a lifestyle choice that usually becomes a financial win after 7 to 10 years. However, if you plan to move in less than 5 years, the closing costs (typically 6-10% to sell) will almost certainly wipe out any equity gains. Use a Monthly Budget Calculator to ensure you can handle the "hidden" 1% maintenance rule before you sign.
Pro Tip: Run your numbers through our Loan Affordability Tool. It will help you see if you're pushing your debt-to-income ratio into the danger zone.
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