Rent vs. Buy Calculator — Find Your Break-Even Year

The Formula

This calculator compares the true total cost of renting versus buying over your chosen time horizon. The buying path tracks principal and interest, property taxes, maintenance, PMIInsurance required by lenders when the down payment is less than 20% of the home price. Protects the lender, not the borrower., and closing costs, then subtracts the net proceeds from selling the home. The renting path tracks all rent payments (adjusted for annual increases) and renters insurance, then subtracts the investment gains your down payment and closing costs would have earned if invested in the stock market at 7%. The break-even year is when cumulative buying costs first become lower than cumulative renting costs.

Variable Definitions

How to Use This Calculator

1. 1

   Enter the home price, down payment percentage, mortgage rate, and closing costs for the buy scenario.

2. 2

   Input your monthly rent, expected annual rent increase rate, and renters insurance for the rent scenario.

3. 3

   Set the property tax rate, maintenance percentage, and home appreciation rate (national averages are shown as defaults).

4. 4

   Choose your expected holding period — try different values to see how the break-even point shifts.

5. 5

   Compare the two paths at different time horizons: the chart shows cumulative costs year by year, and the break-even year tells you which choice is better for your specific timeline.

Common Applications

• Compare the total lifetime cost of renting versus buying a home over different time horizons to find your financial break-even point.
• Understand how long you need to stay in a home for the equity and appreciation benefits of buying to outweigh upfront transaction costs.
• Model how changing home prices, mortgage rates, and rent increases affect whether renting or buying is the better financial decision.

Buying has higher upfront costs from closing and down payment but builds equity, so the cumulative cost grows more slowly than renting over time

Understanding the Concept

The rent vs. buy decision is one of the most significant financial choices most people make. This calculator models the true total cost of each path, accounting for: opportunity cost of the down payment (invested in stocks instead), rent increases over time, building home equity through principal paydown and appreciation, PMIInsurance required by lenders when the down payment is less than 20% of the home price. Protects the lender, not the borrower. elimination when LTVThe total revenue a business can expect from a single customer over their entire relationship. LTV > 3× CAC is considered healthy. hits 80%, and net sale proceeds after selling costs at your chosen time horizon. The break-even point is the year when buying becomes cheaper than renting on a cumulative net-cost basis. Historically, the national break-even is around 3-5 years in most markets, but it varies dramatically based on home prices, rents, and mortgage rates. In high-cost markets like San Francisco or NYC, the break-even can be 7-10+ years. The key insight: transaction costs (closing costs at purchase, ~6% selling costs at sale) are the biggest barrier to short-term buying. If you might move within 3 years, renting almost always wins financially. If you will stay 7+ years, buying typically builds more wealth.

Frequently Asked Questions

Sources & References