What the break-even year means
Buying starts behind. You spend a few percent of the price to get in and will spend six to eight percent to get out, and none of that becomes equity. Over time rent rises while a fixed mortgage payment does not, and principal repayment plus any appreciation build equity — so the buying path catches up. The year it crosses is the answer, and it is the only output of this question that means anything.
Both paths are tracked as net worth, not as monthly cost. That matters because the usual comparison — rent against a mortgage payment — is not a comparison at all. It ignores that the renter still has the down payment, which can be invested, and it treats principal repayment as a cost when it is a transfer from cash into equity.
Read the break-even year as a horizon test rather than a verdict: if you are confident of staying longer, buying is likely to win on these assumptions; if you might move sooner, renting probably wins. And the crossing moves substantially with the appreciation and investment-return figures, which is why the page asks you to set them yourself.
How to use this calculator
- Rent for a comparable home, not your current rent if you are considering a bigger place. Comparing a small apartment against a large house measures the upgrade, not the tenure.
- Price, down payment and rate for the purchase you would actually make.
- Appreciation and investment return. These two drive the answer more than anything else. Run 0% appreciation, then 5%, and see how far the break-even moves.
- Years you would stay. Be honest rather than aspirational — the median owner moves sooner than they expected to.
- Advanced holds tax, insurance, maintenance, dues and the transaction costs at each end. The selling cost is the one people forget and the one that decides short holds.
The costs each side actually carries
Renting costs the rent, and rent rises. Against that, a renter carries no maintenance, no property tax, no insurance beyond contents, no transaction costs and no exposure to the housing market — and can move for the price of a moving van.
Buying costs interest, property tax, insurance, maintenance and any dues — none of which builds equity — plus the transaction costs at both ends. What it buys is a fixed payment while rent inflates, forced saving through principal repayment, exposure to appreciation, and control over where you live.
Principal repayment is the piece most comparisons get wrong. It is not a cost; it moves money from your bank account into your house. That is why this page compares net worth: the mortgage payment overstates the cost of owning, and the rent figure understates the cost of renting once you account for what the down payment could have earned.
Maintenance is the piece most owners underestimate. One percent of value a year is a common planning figure and it arrives unevenly — nothing for three years, then a roof. Budget it monthly even though it will not be spent monthly — the budget calculator is the place to give it a line of its own.
What the numbers cannot tell you
Two assumptions dominate the output and neither is knowable. Appreciation is a forecast about your specific market over your specific horizon; national averages conceal enormous local variation, and buying at the wrong point in a local cycle has cost people far more than any figure on this page. The investment return the renter earns is equally uncertain, and it only materialises if the money is genuinely invested rather than spent.
Then there are the things that are not financial at all. Security of tenure — a landlord cannot sell the home you live in. Freedom to change it. The discipline of forced saving, which for many households is the honest reason buying builds wealth: it is a savings plan you cannot easily skip. Against those, the flexibility to take a job in another city, and the absence of a repair bill you did not choose.
The reasonable use of this calculator is to establish whether the financial case is close or lopsided. If buying wins by a wide margin over your realistic horizon, the non-financial reasons rarely overturn it. If the two are close — which they often are — then the decision belongs to the non-financial reasons, and that is a legitimate place for it to sit.
The five-year rule, and why it is a rule of thumb
The common advice is not to buy unless you will stay five years. That comes from roughly the arithmetic above: transaction costs of around ten percent across both ends take several years of equity building and rent inflation to recover.
It is directional rather than precise, because the real break-even depends on your rate, the gap between rent and ownership costs, and the two uncertain assumptions. In a market where rent is close to the cost of owning and prices are rising, the crossing can arrive in three years. Where owning costs far more than renting and prices are flat, it may never arrive within a sensible horizon — and the calculator says so when that is what the numbers show.
The version of the rule worth keeping is about certainty rather than years: buy when you are confident about staying, and rent when you are not. Uncertainty has a cost, and it is paid on the way out.
Why the answer has changed since 2021
For most of the decade before 2022 this comparison favoured buying almost everywhere, and the reason was arithmetic rather than sentiment: mortgage rates near 3% made the interest portion of ownership unusually cheap, while rents rose steadily. A great deal of received wisdom about buying being obviously better dates from that period.
Higher rates change the calculation in two places at once. The interest cost of owning rises, and — because safe savings and bonds now pay something real — the return the renter earns on the money they did not put down rises too. Both move against buying, which is why a comparison that looked lopsided a few years ago can now come out the other way on defensible assumptions, as the default figures on this page demonstrate.
That does not make renting right. It makes the answer local and time-dependent, which is precisely why a calculator is more useful here than a rule. The variables that decide it — the gap between rent and ownership cost, the rate you can borrow at, and what you would otherwise earn — are all observable today, unlike appreciation, which is not.
The practical implication is to re-run this when your circumstances change rather than treating a conclusion as permanent. A refinance into a lower rate, a rent increase, or a move to a market with a different price-to-rent ratio can each flip the result — and a decision that was correct when you made it can stop being the correct decision to maintain.
The price-to-rent ratio, in one number
If you want a single figure to sanity-check a market, divide the purchase price by a year of rent for a comparable home. The result — the price-to-rent ratio — tells you roughly how expensive buying is relative to renting where you are looking, and it varies enormously between US cities.
As a rough guide, a ratio in the mid-teens or below usually means buying is competitive quickly, because the rent you avoid is large relative to the capital committed. Above about twenty, buying increasingly depends on appreciation to justify itself — you are paying a lot of capital for a modest saving on rent, and the break-even year stretches out accordingly. The defaults on this page work out at roughly sixteen.
The ratio is a screening tool rather than a decision, because it ignores rates, taxes and what you would otherwise earn. But it is quick, it uses only two numbers you can both observe today, and it explains why the same national advice produces opposite answers in different cities. A market where the ratio is twelve and one where it is twenty-eight are not the same decision, and no rule of thumb that ignores the difference is worth following.
It is also the fastest way to notice that you are comparing the wrong things. If the ratio looks extreme, check that the rent figure is genuinely for a comparable property — most surprising ratios turn out to be an apartment measured against a house.
What this calculator assumes
- A fixed-rate 30-year mortgage held throughout, with no refinancing.
- Steady appreciation, rent growth and investment returns. None behaves that way; they are assumptions and the page says so repeatedly rather than once.
- The renter invests the difference. If the money is spent instead, renting loses much of its case — which is the honest caveat to a comparison built this way.
- No tax effects. Mortgage interest and property tax may be deductible if you itemise, which favours buying for some filers; capital gains on a primary residence are largely excluded, which also favours buying.
- No moving costs on the renting path, and no rent-free periods or landlord concessions.
- Maintenance as a flat percentage of value, spent evenly, which it never is.
These are planning estimates for a decision that is partly not financial. Run it more than once, with assumptions you would defend out loud.
Rent or buy questions people ask
Is it cheaper to rent or buy?
Month to month, renting is usually cheaper; over a long enough horizon, buying usually wins. The break-even year above is where the two cross on your numbers, and it is the only form of the answer that survives contact with a specific market.
Why does the calculator care what I would earn investing?
Because the money you put down is not free. A renter who invests the deposit and the monthly difference builds wealth too, and ignoring that is what makes most rent-versus-buy comparisons favour buying incorrectly. The comparison only works as net worth against net worth.
Does buying always build wealth?
It builds equity, which is not the same thing. Sell inside a few years and transaction costs can consume the equity built and more, even in a rising market. Much of the wealth effect attributed to homeownership is really the effect of forced saving over decades.
What if I do not know how long I will stay?
That uncertainty is itself an argument for renting, because the cost of being wrong is paid on exit. If the break-even year is comfortably inside the horizon you are confident about, buying is defensible; if it sits beyond it, renting is the lower-risk choice.
Should I include the tax deduction?
Only if you would actually itemise, which fewer filers do since the standard deduction rose. Where it applies it improves the buying case modestly. This calculator excludes it, so treat the buying result as slightly conservative for itemisers.