Quick answer: On a $400,000 home with $80,000 down at 6.5% versus $2,200 rent growing 3% a year, buying becomes cheaper in year 12. Over 20 years, buying costs about $565,000 versus $709,000 renting. Enter your numbers above to find your break-even year.
Last reviewed: October 2026
Key facts
- The break-even year is the first year cumulative renting costs at least as much as cumulative buying.
- Buying starts expensive (down payment + closing costs) but its payment is mostly fixed; rent compounds upward every year.
- Home appreciation builds equity on top of the payment comparison, strengthening the buy case over time.
- Staying under 5-7 years usually favors renting; staying 10+ years usually favors buying.
A rent vs buy calculator compares the total cost of buying a home against renting over the years you plan to stay. It adds up your down payment plus mortgage payments year by year, grows the rent by your expected increase, and finds the break-even year when buying becomes the cheaper choice. you stay long enough. The only question is when. This free tool finds your crossover year from your own numbers, with no signup.
How to use the rent vs buy calculator
- Enter the home price and your down payment.
- Enter the mortgage rate and loan term you expect.
- Enter your current monthly rent for a comparable place.
- Enter annual rent growth (3% is a common US assumption) and home appreciation (4% long-run average).
- Set how many years to compare and click Calculate for your break-even year and total costs.
Rent vs buy calculator formula: the break-even year
The calculator builds two running totals. Buying accumulates your down payment plus every year of principal-and-interest payments. Renting accumulates 12 months of rent each year, with each year's rent multiplied by (1 + growth)^year. The break-even year is the first year the renting total catches up to the buying total. Home appreciation does not enter the payment totals directly, but it is shown because the growing home value becomes your equity, a bonus that makes buying look even better in the long run.
This is a payment comparison, not a full net-worth model: it leaves out property tax, insurance, maintenance, closing costs, and the investment return on an unspent down payment. Those matter at the margin, but the break-even year from payments alone answers the core question most households ask.
Worked examples
Example 1: $400,000 home, $80,000 down, 6.5%, $2,200 rent
Loan = $320,000; monthly P&I at 6.5% over 30 years = $2,022.62 ($24,271.41/year). Buying total after t years = 80,000 + 24,271.41 x t. Renting total = 26,400 x (1.03^t - 1)/0.03. At year 11: buying = $346,986, renting = $338,126 (buying still ahead). At year 12: buying = $371,257, renting = $374,670. Renting first costs more in year 12: the break-even year. Over 20 years: buying $565,428 vs renting $709,378.
Example 2: $250,000 home, $50,000 down, 6%, $1,800 rent
Loan = $200,000; monthly P&I at 6% over 30 years = $1,199.10 ($14,389.20/year). Year 5: buying = $121,946, renting = $114,677. Year 6: buying = $136,335, renting = $139,718. Break-even in year 6. Cheaper homes with moderate rents cross over much faster, which is why buying usually wins in affordable markets.
What moves the break-even year: reference table
| Factor | Moves break-even earlier | Moves break-even later |
|---|---|---|
| How long you stay | 10+ years | Under 5 years |
| Rent growth | Fast (4-5%) | Slow (1-2%) |
| Home price vs rent | Low price-to-rent ratio | High price-to-rent ratio |
| Mortgage rate | Lower rate | Higher rate |
| Down payment | Larger down payment | Small down payment |
| Home appreciation | Strong appreciation (equity bonus) | Flat or falling prices |
Tips for deciding between renting and buying
- Use the 5-year rule of thumb. If you will move within 5 years, renting usually wins once closing costs and selling fees are counted; beyond 7-10 years, buying usually wins.
- Compare comparable homes. The rent input should be a similar home in a similar area, not your current cheap apartment versus a dream house.
- Check the price-to-rent ratio. Divide the home price by annual rent: under 15 favors buying, over 20 favors renting, 15-20 is a toss-up.
- Do not forget the hidden buy costs. Maintenance (~1% of value yearly), property tax, insurance, and HOA shift break-even later; add them mentally to the buying total.
- Value flexibility honestly. Renting buys mobility for careers and life changes; that option has real worth the math cannot see.
Common mistakes
- Comparing mortgage payment to rent only. The down payment is part of buying's cost; skipping it makes buying look cheaper than it is early on.
- Assuming rent never rises. Even 3% annual growth doubles rent in about 24 years; flat-rent assumptions always favor renting unfairly.
- Ignoring selling costs. Agent commissions and closing costs take roughly 8-10% when you sell, which matters if you move soon.
- Forgetting the down payment could earn returns. Money not spent on a down payment could be invested; full models count this opportunity cost against buying.
- Letting appreciation decide alone. Homes are for living in first; buy for the payment math and treat appreciation as a bonus.
Frequently asked questions
Is it better to rent or buy a house?
It depends on how long you stay. Buying usually wins if you stay 7-10+ years because the fixed mortgage payment stays flat while rent rises. Renting usually wins under 5 years because closing and selling costs eat the early equity. Run your numbers above for your break-even year.
What is the break-even year in rent vs buy?
The break-even year is the first year your cumulative renting costs reach your cumulative buying costs (down payment plus mortgage payments). After that year, buying has cost you less in total payments than renting would have.
What is a good price-to-rent ratio?
Divide the home price by the annual rent. A ratio under 15 generally favors buying, over 20 favors renting, and 15-20 is a gray zone where your stay length and rent growth decide. It is a quick sanity check alongside the full calculation.
Does home appreciation count in rent vs buy?
Appreciation builds your equity on top of the payment comparison: you get the home's growth while paying a flat mortgage. This calculator shows appreciation as context because it strengthens the long-term case for buying without changing the payment totals.
How long should I stay in a house to make buying worth it?
The common rule of thumb is 5-7 years minimum, so that appreciation and principal paydown outweigh buying and selling costs of roughly 8-10%. In affordable markets with moderate rents, the payment break-even can come as early as year 5-6.
Related: Refinance Calculator: Break-Even and Savings
What is the opportunity cost of a down payment?
Money tied up in a down payment cannot earn investment returns elsewhere. An $80,000 down payment invested at 6% a year for 10 years would grow to 80,000 x 1.06^10 = 80,000 x 1.790848 = $143,268, a gain of $63,268. A fair rent-vs-buy comparison credits the renter with that growth, which is why buying can look worse over short horizons even when the monthly payment looks similar.
How fast does rent grow over 10 years?
Rent compounds every year. Starting at $2,200 a month with 3% annual growth, the monthly rent in year 10 is 2,200 x 1.03^9 = 2,200 x 1.304773 = $2,870.50. Total rent paid over those 10 years is about $302,647. That steady upward slope is the main force that eventually pushes the break-even year in buying's favour.
Sources
- Consumer Financial Protection Bureau (CFPB): home-buying tools and rent-vs-buy decision guidance
- Internal Revenue Service (IRS): Topic 505 on the mortgage interest deduction, a tax factor in the buy decision
Key takeaways
- Bookmark this tool and rerun it whenever rents jump or rates move.
- $400,000 home, $80,000 down, 6.5%, $2,200 rent at 3% growth: break-even in year 12.
- Buying starts expensive but its payment is fixed; rent compounds upward every year.
- Under 5 years usually favors renting; 10+ years usually favors buying.
- Check the price-to-rent ratio: under 15 favors buying, over 20 favors renting.
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