What is the rent vs. buy break-even point?

The break-even point is the year at which the total cost of buying a home becomes less than the total cost of renting. Before this point, renting is often cheaper when factoring in closing costs, interest, and taxes. After this point, buying typically builds more net worth through equity accumulation and home appreciation.

Does buying always build more wealth than renting?

Not necessarily. If you invest the difference between your buy costs and rent costs (including the down payment) in the stock market, renting can sometimes match or exceed the wealth-building of homeownership — especially over short time horizons. This calculator includes an investment return assumption to model this scenario accurately.

What costs does this calculator include for buying?

The buy path includes: mortgage principal and interest, property taxes, homeowners insurance, HOA fees, and a standard 6% transaction cost (closing costs + agent fees) on sale. It credits you for equity built through principal paydown and home appreciation. The sell cost is applied at the end of your time horizon.

🏡 Home Buying

Rent vs. Buy Calculator

Compare renting and buying side by side. See which path builds more wealth over your time horizon — and find your personal break-even year.

🏠 Buying costs

Home price ($)

Down payment (%) E.g. 10 for 10%

Mortgage rate (% / yr)

Loan term (years)

Property tax (% / yr) Of home value. Avg US ≈ 1.1%

Home insurance ($/mo)

HOA fees ($/mo)

Home appreciation (% / yr) assumption

🔑 Renting & time horizon

Monthly rent ($)

Annual rent increase (% / yr) assumption

Investment return if renting (% / yr) assumption What your down payment earns if invested

Time horizon (years) How long you plan to stay

Estimate only. Results use your assumptions for appreciation, investment return, and rent growth — actual results will vary. Transaction costs estimated at 6% of home value on sale (closing costs + agent commission). Does not include maintenance costs (~1–2% of home value/year), PMI, or tax benefits (mortgage interest deduction). Not financial advice.

How the rent vs. buy comparison works

This calculator compares the net worth position of a buyer vs. a renter at the end of your time horizon — not just monthly cash flow. That's the most complete picture of which option actually builds more wealth.

What the buy path includes

Monthly housing costs (P&I + taxes + insurance + HOA), plus a 6% transaction cost on sale to account for closing costs and agent commission. On the asset side, it credits equity built through principal paydown, plus home appreciation on the full home value.

What the rent path includes

Total rent paid over the period, increasing at your assumed annual rate. Critically, the down payment you didn't spend on a home is assumed to be invested at your stated investment return rate — this is how renting can sometimes match homeownership for wealth-building.

What the break-even year means

The break-even year is when buying first becomes more advantageous than renting in net-worth terms. Before that year, the renter's invested down payment and lower cash outlay often win. After that year, home equity and appreciation tip the scales toward buying.

📋 Worked Example: $420K Home vs. $1,950/Month Rent — 7-Year Horizon

Keisha is deciding whether to buy a $420,000 home (20% down, 6.8% mortgage) or continue renting at $1,950/month. She plans to stay for about 7 years. Here's the complete cost breakdown:

Cost Component (7-Year Total)	Buying	Renting
Upfront cash required	$84,000 down payment	$3,900 (2 mo. deposit)
Monthly housing payment	$2,190 mortgage + $380 tax/ins	$1,950 → $2,330 (3%/yr rise)
Maintenance costs (7 yrs)	+$29,400 (avg. 1%/yr)	$0
Equity built (principal paid)	−$44,000 (reduces true cost)	$0
Home appreciation at 3%/yr	−$97,000 value gain	—
Selling costs at 6%	+$31,000	—
Opportunity cost of $84k down (7% invested)	+$51,000	−$51,000 (invest instead)
7-Year Total Payments	~$243,000	~$188,000
True net cost after equity & appreciation	~$163,000	~$137,000

💡 The verdict at 7 years: Renting is cheaper by ~$26,000 in this scenario. But if Keisha stays 10+ years, compounding appreciation flips the equation decisively — buying becomes the clear financial winner. Use the calculator to find your personal break-even point.

Frequently asked questions

Is it better to rent or buy right now?

It depends on your local market and how long you plan to stay. Buying is generally better the longer your time horizon. Use this calculator to find your personal break-even year — that's the clearest answer for your specific numbers.

Does buying always beat renting for wealth?

No. If you invest the down payment and the monthly cost savings (renting is often cheaper short-term), renting can match or beat buying — especially in high-price markets over short horizons. The investment return assumption is the key variable to test.

Why is 6% used for transaction costs?

6% reflects typical total transaction costs on a home sale: 2.5–3% buyer's agent commission, 2.5–3% seller's agent commission, and misc. closing costs. The recent NAR settlement is changing buyer's agent commission norms, so your actual costs may be lower — adjust your inputs accordingly.

What investment return should I use?

The long-run average annual return of the US stock market (S&P 500) is roughly 7% inflation-adjusted. If you expect to keep the money in a HYSA or bonds, use 4–5%. If you're unlikely to invest the difference at all, set it to 0% — that will make buying look more favorable.

LedgerlyTools calculators use standard financial formulas — the same math financial professionals use. We're developers, not financial advisors. Results are estimates. See our methodology →