Rent vs buy a $1M house
Over 30 years, buying a $1M home comes out about $631,074 ahead — comparing buying (20% down, $200,000) against renting at $5,000/month and investing the down payment plus any monthly savings. Both paths start with the same money; the difference is where it goes.
Net worth over time: rent vs buy
Both start at age 30 with enough for the $200,000 down payment. The renter invests it (and any monthly difference) at 7%; the buyer puts it into a $1M home appreciating 3%/yr with a 30-year mortgage. In today's dollars:
| Age | Rent & invest | Buy |
|---|---|---|
| 30 | $246,306 | $242,009 |
| 35 | $546,537 | $608,567 |
| 40 | $907,009 | $1,045,636 |
| 45 | $1,340,496 | $1,568,492 |
| 50 | $1,862,425 | $2,195,512 |
| 55 | $2,491,443 | $2,948,839 |
| 60 | $3,250,090 | $3,881,165 |
What actually drives the answer
Rent vs buy is rarely about "throwing money away on rent." It hinges on a handful of levers this projection captures:
- Price-to-rent ratio. Here a $1M home is compared to $5,000/month rent. Where rent is cheap relative to prices, renting-and-investing can win; where buying is cheap relative to rent, owning pulls ahead.
- How long you stay. Buying carries big upfront costs (down payment, closing) that take years to earn back. The crossover in this scenario is around age 31. Move sooner and renting often wins.
- The invested difference. Renting only wins if you actually invest the down payment and monthly savings — not spend them. This model assumes you do.
Assumptions: 20% down, 6.5% mortgage, 30-yr term, 3% home appreciation, 1.1% property tax, 7% investment return, 3% inflation, single filer, no-income-tax state. Your local prices, rent, and how long you'll stay change the answer — model yours in the calculator.
Where the mortgage-interest deduction stops helping
Buyers at this level often assume mortgage interest is a dependable tax break, but two limits blunt it. First, it only helps if you itemize, and since the standard deduction was roughly doubled, most households no longer do. If you take the standard deduction, your mortgage interest changes your tax bill by nothing at all.
Second, even for itemizers the deduction is capped: interest is deductible only on mortgage debt up to a set limit, and a million-dollar home financed conventionally can carry a loan above that ceiling — so interest on the excess does not count. The deduction for state and local taxes, which includes your property tax, is separately capped as well. Both limits bite hardest on exactly this kind of expensive home.
The practical takeaway: do not price a pricey purchase around a tax benefit you may not fully receive. Limits and thresholds change, so check the current rules, but plan on the after-tax cost of owning sitting closer to the full cost than the old rule of thumb suggests.
Common questions
Is it better to rent or buy a $1M house?
Over 30 years in this projection, buying comes out about $631,074 ahead — buying ends around $3,881,165 vs renting-and-investing around $3,250,090. It flips based on how long you stay, local price-to-rent, and whether you actually invest the difference.
How much do you need to buy a $1M house?
A 20% down payment is about $200,000, plus closing costs. Less than 20% down usually adds PMI. Renting frees that cash to invest instead — which is the core of the trade-off.
Does renting really mean throwing money away?
No. Rent buys housing without the costs of ownership (property tax, maintenance, transaction costs), and the down payment can be invested. Buying builds equity but ties up cash and assumes appreciation. Neither is automatically "throwing money away."