How to Calculate Your Rent vs. Buy Break-Even Point
What a rent vs. buy break-even year means, a worked example, and which assumptions move it the most.
The break-even year in a rent-vs-buy comparison is the point where buying's net worth first overtakes renting's net worth (or the reverse) — not a simple formula you can compute by hand, since it depends on a running comparison of appreciating home equity against a compounding investment portfolio.
Why it usually starts in renting's favor
At month one, a buyer has already paid closing costs and has equity in the home roughly equal to their down payment minus those costs, while a renter has their full down payment invested and growing — so renting typically starts ahead. As months pass, home appreciation and principal paydown build buying's equity faster than the investment portfolio grows relative to it, eventually crossing over.
Worked example
| Input | Value |
|---|---|
| Home price | $400,000 |
| Down payment | $80,000 |
| Mortgage rate | 6.5%, 30-year |
| Comparable rent | $2,200/month |
| Assumptions | 3.5% appreciation, 3% rent growth, 6.5% investment return |
| Break-even | Around year 10 |
Stay shorter than the break-even year, and renting (with the difference invested) tends to come out ahead; stay longer, and buying tends to win. The exact year shifts meaningfully with appreciation and investment return assumptions — try both a conservative and an optimistic case in the Rent vs. Buy Calculator to see the real range.
What moves the break-even year the most
- A higher assumed investment return pushes the break-even year later (renting looks better longer).
- A higher assumed home appreciation rate pulls the break-even year earlier (buying looks better sooner).
- Higher buying or selling costs push the break-even year later, since they're a fixed drag regardless of how long you stay.