Rent vs Buy a $400K Home at 7% Mortgage Rates: Break-Even Runs From 4 Years to 10+ (Here's the Math)

You're paying $2,300 a month in rent. A $400,000 home just hit the market, you have $92,000 saved for the down payment and closing costs, and this morning NerdWallet's Mortgage Rates Today, Monday, September 21: A Little Respite says rates are holding steady just above 7%.

A little respite. Is it enough to buy? Let's run the math.

One note on inputs. The $400K price, $2,300 rent, and $92K in savings are an illustrative example I built, not data for a specific metro. That's deliberate. Your city changes every one of those numbers, and the answer changes with them. Below I show which inputs matter most, so you can swap in your own.

What This Week's Headlines Are Saying (and What They Can't)

Five stories crossed my desk this week, and they point at the same problem:

• NerdWallet has rates holding just above 7%.
• Realtor.com's Housing Week Ahead previews down payment trends, new-home sales, and "bracing for 7% mortgage rates." Even the preview treats 7% as something to brace for.
• Realtor.com's 401(k) match piece says match cuts threaten retirement savings and make future housing costs harder to afford.
• AirDNA's 2026 Hidden Gem report lists 17 affordable short-term rental markets, led by Rockford, IL.
• HousingWire reports that Miami Realtors and RWorld formed an education partnership, with classes in person, by livestream, and online.

Each one is useful. None of them knows your income, your savings, your timeline, or how you'd feel if the water heater died in month 14. The rest of this post turns them into math you can check.

The True Monthly Cost at 7%: Not Just the Mortgage

Here's the example buyer: $400,000 home, 20% down ($80,000), a $320,000 loan at 7.00% on a 30-year fixed. I'm using exactly 7.00% for clean math. If your quote is a bit higher, your payment is too.

Monthly cost (Year 1)	Amount	Assumption
Principal and interest	$2,129	$320,000 at 7.00%, 30 years
Property tax	$367	1.1% of price per year (example)
Homeowners insurance	$150	$1,800 per year (example)
Maintenance	$333	1% of price per year
Total owner cash cost	$2,979	No HOA, no PMI (20% down)
Rent on a comparable place	$2,300	Example
Owning costs more by	$679/month	$8,148 in Year 1

Two more things sit under that table:

• Almost none of the first year's payment builds equity. Of the $25,548 you pay in P&I in Year 1, roughly $3,250 is principal. The rest is interest.
• Your $92,000 has a price tag. That's the $80,000 down plus roughly $12,000 in closing costs (3%, my assumption). Invested at 7%, it would earn about $6,440 a year, or $537 a month, in Year 1. That's the opportunity cost of putting the money in a house instead. I dig into it in what an $86K down payment earns in the S&P 500 vs home equity.

If you want to see how HOA, PMI, or a pricier insurance market change the number, the $450K home at 7.1% breakdown shows how fast a "$2,722 payment" turns into a much bigger real one.

This is the kind of analysis Torvani runs for you, so you don't have to build the spreadsheet yourself.

The Break-Even Math: 5, 7, and 10 Years

Now the real question. If you buy, how long until you're ahead of the person who kept renting?

The setup (all example assumptions, not a forecast):

• The renter invests the full $92,000 upfront, plus every month's cost difference between owning and renting, at 7% a year, before taxes.
• Rent starts at $2,300 and rises 3% a year. Tax, insurance, and maintenance also rise 3% a year. The fixed P&I doesn't move.
• The owner sells at the end of the horizon and pays 6% in selling costs.
• No mortgage interest deduction (assumes you take the standard deduction). No taxes on the renter's investment gains.
• Annual compounding, with contributions at year-end. It's a simplified model.

The table shows owner's net worth minus renter's net worth, rounded to the nearest $100. Negative means renting is ahead.

Home appreciation per year	After 5 years	After 7 years	After 10 years	Approx. break-even
3%	-$35,500	-$34,500	-$32,100	Beyond 10 years
4%	-$13,900	-$2,200	+$19,100	About 7.3 years
5%	+$8,500	+$32,100	+$75,000	About 4.2 years

For reference, at Year 10 the renter's portfolio is about $262,800 in this example. The owner at 3% appreciation walks away with about $230,700 after paying off the loan and selling costs.

Three things stand out.

1. One percentage point of appreciation moves break-even by about three years. Nobody knows what your city's prices will do. So any "buy if you'll stay 5 years" rule is a guess with a tidy number on it.

2. At 3% appreciation and 7% market returns, renting wins through Year 10. The gap narrows by under $1,000 a year between Years 7 and 10. That isn't an argument that renting is always right. It's what happens when a 7% mortgage meets a modest-growth market and your down payment has somewhere else to go.

3. This flips if the renter doesn't actually invest the difference. I gave the renter perfect discipline. If the $679 monthly gap gets spent, buying looks better, because a mortgage is forced savings. That's a real advantage of owning, and it's worth being honest about whether you're the person who invests the difference.

Want your own version of this table? You can model this for your specific situation at Torvani by entering your price, rent, savings, and timeline.

Why the Rate Matters More Than the Headlines Suggest

"Just above 7%" and "bracing for 7%" are the phrases of the week. Here's what a point of rate does on this example loan:

• At 7.00%: $2,129/month in P&I on $320,000.
• At 6.00%: about $1,919/month.
• Difference: about $210 a month, or $2,520 a year, for as long as you hold the loan.

That doesn't say "wait for 6%." Rates could go up, sideways, or down, and a lower rate often arrives with higher prices or more competition. The point is that the 7% you lock is a real number, and the math above uses it.

Rates also interact with local prices. Our Las Vegas at 7% breakdown found renting beat buying by $1,066 a month. The Kansas City analysis found a break-even that swings from 4 years to never depending on the inputs. Same rates, very different answers, because price-to-rent ratios differ by city.

The 401(k) Wrinkle Nobody Puts in the Rent-vs-Buy Calculator

Realtor.com's When 401(k) Matches Disappear, Your Mortgage Payment Strategy Doesn't Have To raises something rent-vs-buy calculators tend to skip. Your retirement contributions and your housing budget come out of the same paycheck.

Here's an example (again, mine, not from the article). You earn $85,000, and your employer matches 50 cents on the dollar up to 6% of pay:

• You contribute 6%, or $5,100 a year.
• The match adds $2,550 a year, or $212.50 a month.
• If the match disappears, you lose $2,550 a year. Invested at 7% for 10 years with year-end contributions, that's about $35,200 you'd have accumulated.

Notice how close that $35,200 is to the $32,100–$35,500 renting lead in the 3% appreciation row. In this example, losing a match costs about as much as the whole rent-vs-buy gap.

Then look back at the first table. Owning costs $679 a month more than renting in Year 1. If that gap pushes you to trim 401(k) contributions below the match threshold, you're giving up a guaranteed 50% return on those dollars. Home appreciation can't compete with that.

If your match is intact, protect it before you stretch for a bigger house. If it just disappeared, your cash flow tightened, and the $2,979 monthly cost deserves a harder look.

Short-Term Rentals: Can a Rockford-Style Market Fix the Math?

AirDNA's Hidden Gem short-term rental markets report names 17 affordable markets for high-yield investing, led by Rockford, IL. It's tempting to read that as a way to close the $679 gap.

Run the arithmetic. To match renting's cash flow in the example, a property would need to net $679 a month, or $8,148 a year, after platform fees, cleaning, vacancy, taxes, and upkeep. That's possible in some markets. But three caveats apply:

• Investment-property loans generally carry higher rates and larger down payments than owner-occupied ones, so my $2,129 P&I would be optimistic.
• A "hidden gem" list is about yield potential. It says nothing about whether you'd want to live there or manage a rental from a distance.
• You'd be trading a housing decision for a small-business decision, with vacancy and regulation risk.

It may be the right move for some people. It's a different analysis, not a shortcut around this one.

When Renting Wins, When Buying Wins

Neither side is the "responsible" one. Each wins under different conditions.

Renting tends to win when:

• You might move within 5 to 7 years, especially in a modest-growth market (see the 3% and 4% rows).
• Your savings are thin. A $92,000 cash outlay leaves little cushion for a $6,000 roof repair.
• Your 401(k) match is at risk and you need cash-flow flexibility.
• You'll actually invest the difference every month.

Buying tends to win when:

• You're confident you'll stay 10+ years in a market with steady appreciation.
• Your local rents are rising quickly, since your P&I stays fixed while rent doesn't.
• You value stability, like renovating and not worrying about a landlord selling.
• You know you wouldn't invest the difference on your own.

The Five Variables That Decide Your Answer

Here's how each personal variable moves the example. Test yourself against them.

Your variable	What it changes	Example number
City	Price-to-rent ratio and appreciation	This example: $400K price vs $27,600 annual rent, a ratio of about 14.5
Income	Whether $2,979/month is comfortable	A common 28%-of-gross rule of thumb implies about $127,700 gross income
Savings	Opportunity cost and cushion	$92,000 at 7% is about $6,440 a year
Timeline	Break-even vs. selling costs	About 4 years at 5% appreciation, 10+ years at 3%
Risk tolerance	Market returns vs. home equity	A 7% investment return is an assumption, not a promise

The Miami Realtors and RWorld partnership, reported by HousingWire in Miami Realtors + RWorld forms new education partnership, is a good sign that housing professionals are investing in learning their markets. But even the best-trained agent doesn't know your savings, your job security, or how long you'll stay. Those are the inputs that decide the result.

Run Your Own Numbers Before You Fall for the Listing

Here's the honest summary. At just-above-7% rates, a $400K home in this example breaks even in about 4 years if prices climb 5% a year, about 7 years at 4%, and past 10 years at 3%. Your 401(k) match, your monthly cash cushion, and how long you'll stay can each swing that by years. The question isn't whether buying is smart. It's whether it's smart under your assumptions, at your rate, in your city.

Plug in your city's price and rent, your actual down payment, your rate quote, and a range of appreciation scenarios at Torvani. You'll see your own break-even instead of a rule of thumb, and you can decide from there, whether that means buying, renting, or waiting for the next rate move.

Sources

• When 401(k) Matches Disappear, Your Mortgage Payment Strategy Doesn’t Have To — Realtor.com News
• Housing Week Ahead: Down Payment Trends, New-Home Sales, and Bracing for 7% Mortgage Rates — Realtor.com News
• Mortgage Rates Today, Monday, September 21: A Little Respite — NerdWallet
• The Hidden Gem Short-Term Rental Markets of 2026: Where Owners Are Maximizing Returns — Realtor.com News
• Miami Realtors + RWorld forms new education partnership — HousingWire