Rent vs Buy Break-Even Calculator

How it works

Buy net cost = down + closing + Σ(mortgage + tax + upkeep) − sale equity · Rent net cost = Σ rent − investment gains on the down payment · Break-even = first year buy net < rent net

Renting is not "throwing money away" — it frees up the down payment to be invested, and that opportunity cost is the number most rent-vs-buy comparisons ignore. This model tracks both paths year by year: the owner builds equity through appreciation and principal paydown but pays tax, insurance and upkeep, while the renter pays rising rent yet keeps a growing investment fund. The break-even year is when cumulative ownership cost (net of the equity you would walk away with, after a 6% sale cost) finally drops below the renter's net cost. Staying longer than the break-even favors buying; moving sooner favors renting.

Worked example

On a $400,000 home with 20% down at 6.5% over 30 years, the buyer needs about $92,000 upfront (down payment plus ~3% closing). Against $2,200 rent rising 3% a year, with 3% home appreciation and a 5% return on the invested down payment, buying typically break-evens around year 5 — earlier if the home appreciates faster, later if rent stays cheap.

Frequently asked questions