Rent vs Buy Break-Even Calculator
The decision to rent or buy a home is not just about monthly payments. Buying involves substantial upfront costs and long-term commitments, while renting offers flexibility but no equity accumulation. This calculator computes the cumulative net cost of each path year by year: renting includes monthly rent escalating with inflation, while buying includes mortgage payments, property taxes, insurance, maintenance, and opportunity cost of the down payment, offset by equity buildup and home appreciation. The break-even year is when total buying costs first fall below total renting costs.
Rent vs buy comparison method
Annual Buy Cost = Mortgage Interest + Tax + Insurance + Maintenance
Annual Rent Cost = Monthly Rent * 12 * (1 + rent growth)^year
Opportunity Cost = Down Payment * investment return
Break-Even: year when cumulative net buy < cumulative rent
Each year, the net cost of buying is computed as: mortgage interest paid + property tax + maintenance - principal paid (equity gain) - home appreciation gain + opportunity cost of down payment. When the cumulative net buy cost falls below cumulative rent paid, that is the break-even year.
Key factors in the rent vs buy decision
- The shorter you plan to stay, the more likely renting is cheaper (closing costs spread over fewer years).
- High home price-to-rent ratios generally favor renting; low ratios favor buying.
- Rising rents and home appreciation accelerate the break-even year.
- High investment returns on alternative savings slow the break-even (opportunity cost is higher).
- Local property tax rates and maintenance costs significantly affect the comparison.
Rent vs buy: frequently asked questions
Why is there a break-even point for renting vs buying?
Buying a home comes with large upfront transaction costs (down payment, closing costs) and ongoing costs (mortgage interest, property taxes, maintenance, insurance) that often exceed rent in the early years. Over time, equity builds and rent rises, eventually making ownership cheaper on a total-cost basis.
What costs are included in the buy scenario?
The buy scenario includes mortgage principal and interest, property taxes, homeowner's insurance, maintenance (typically estimated at 1% of home value per year), and closing costs amortized over the holding period. It credits home equity accumulation (principal paydown plus appreciation).
What does opportunity cost mean in this context?
The down payment and closing costs are cash you could have invested instead. The opportunity cost is the return you forgo by tying that money up in a home purchase. This calculator uses a user-supplied investment return rate to estimate that cost.
How does rent growth affect the break-even year?
The faster rent increases over time, the sooner buying becomes cheaper. If rents are rising quickly in your market, the break-even year comes sooner. If rents are stable, it may take longer for buying to pay off.
Is this calculator suitable for all US markets?
The calculator uses inputs you supply for rent, home price, and rates. Local property tax rates, HOA fees, and market appreciation vary widely. Input values specific to your situation for the most accurate comparison.
Official sources
- Consumer Financial Protection Bureau: Owning a Home.
- HUD: Rental Assistance.
Reviewed by the CalculatorHub team, edited by James Graham, 15 June 2026. See our methodology.