Rent vs Buy Break-Even

Personal Finance
Updated Apr 2026 • Has calculator

The number of years until buying a home produces greater net wealth than renting and investing the difference.

What is Rent vs Buy?

The rent vs buy break-even analysis compares the total wealth of a homeowner against a renter who invests the down payment and monthly cost savings. Buying involves large upfront costs (down payment, 3% closing costs) and ongoing non-equity expenses (property tax, insurance, maintenance). Renting is initially cheaper in most markets, but rising rents and home appreciation eventually favor buying. The break-even year is when the buyer's home equity exceeds the renter's investment portfolio.

Formula

Month-by-month simulation: buyer equity vs renter portfolio until crossover

Worked Example

Worked example — US national median scenario — 2024

2024

Step 1  Home: $400,000 | Down: 20% ($80,000) | Closing costs: ~$12,000
Step 2  Mortgage: $320,000 at 6.8% for 30 years = ~$2,087/mo
Step 3  Property tax + insurance + maintenance ≈ $900/mo
Step 4  Total buyer cost: ~$2,987/mo vs rent $2,200/mo
Step 5  Renter invests $92,000 + $787/mo surplus at 7% annual return
Step 6  Break-even: buyer's equity surpasses renter's portfolio around year 7–9
Step 7  → Plan to stay 7+ years before buying makes financial sense in this scenario

Source: New York Times — Is It Better to Rent or Buy? (methodology) (2024-01-01)

Calculate Rent vs Buy

Purchase price of the home

Down payment as % of home price (20% avoids PMI)

Annual fixed mortgage interest rate

Loan repayment term in years

Current monthly rent for a comparable home

Annual property tax as % of home value (US average ≈ 1.1%)

Annual homeowners insurance premium

Annual maintenance and repairs (rule of thumb: 1% of home value)

Expected annual home price appreciation (US historical avg ≈ 4%)

Expected annual increase in rent (historical avg ≈ 3%)

Annual return if renter invests the down payment and monthly savings

Break-Even

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Not investment advice.

How to Interpret Rent vs Buy

< 3
Buy immediately — strong financial case for buying
3 – 7
Buy if staying 3–7 years — reasonable break-even
7 – 15
Borderline — renting may be better for shorter stays
> 15
Renting likely better in this market
Sources
  1. New York Times — Rent or Buy Calculator
  2. Investopedia — Rent vs Buy