Rent vs. Buy in 2026: The 5% Rule Explained
The 5% rule is a fast way to compare renting vs buying. It blends property taxes, maintenance, and the opportunity cost of your down payment into a single number so you can decide if buying makes sense.
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The 5% rule in one sentence
Multiply the home price by 5%, divide by 12, and compare it to your monthly rent. If rent is lower, renting can be cheaper; if rent is higher, buying may be competitive.
What that 5% actually includes
- โข Property taxes (about 1% annually)
- โข Maintenance and repairs (about 1% annually)
- โข Opportunity cost of your down payment (about 3%)
When renting usually wins
Renting often wins if you plan to move within 3-5 years, live in a high-price market, or need flexibility.
When buying usually wins
Buying tends to win if you plan to stay long-term and can afford the full PITI payment without stretching.
Anand Godar
Financial engineer and founder of QuantCurb. Former fintech data scientist building institutional-grade calculators for everyday wealth decisions.
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