Rent vs Buy Calculator: Finding the Break-Even Year

October 14, 2026 · Homes and property

Whether it is better to rent or buy comes down to one number: the break-even year, the point where the total cost of owning, after you sell, drops below the total rent you would have paid. Buying costs a round trip - closing costs on the way in, selling costs on the way out - and owning has to earn that back before it wins. On an illustrative $340,000 house against $1,950 a month of rent, the rent vs buy break even is 16 years if home prices stay flat and 6 years if they rise 3% a year. Same house, same rent, same loan. Only the appreciation assumption changed, and it moved the answer by 10 years.

Below is the formula, the worked numbers, and what changes when you run it for your own location.

The rent vs buy formula

For any year Y, compare two totals.

Renting, cumulative: every month of rent paid so far, with rent rising each year:

Rent paid = 12 × R × ((1 + g)^Y - 1) / g

where R is today’s monthly rent and g is yearly rent growth.

Owning, net cost if you sold at the end of year Y:

Net cost of owning = cash paid out - equity you walk away with

Cash paid out = down payment + buying costs
              + mortgage payments + tax, insurance and maintenance

Equity = home value × (1 - selling cost %) - loan balance

Buying beats renting in the first year where the net cost of owning is at or below the rent paid. Before that year, selling would leave you worse off than if you had rented.

The worked example

All inputs are illustrative, not quotes or market rates:

• Price $340,000, 10% down ($34,000), 6.5% fixed for 30 years
• Rent for a comparable home $1,950 a month, rising 3% a year
• Property tax 1.25% of the home’s value a year, insurance $1,600 a year, maintenance allowance 1% of the value a year (in year one, the price)
• Buying costs 3% and selling costs 7% - example figures; both vary by market and by deal, so put your own in

The monthly comparison is not the whole story

The mortgage payment is $1,934.13, which looks close to the $1,950 rent. But tax, insurance and maintenance add $770.83 a month, so the true monthly cost of owning is $2,704.96 - $754.96 more than rent. The mortgage is only 72% of it.

Even that leaves out the part that decides the answer.

The round trip

At the example percentages, buying this house costs $10,200 at closing and selling it costs $23,800: a round trip of $34,000, or 10% of the price. The selling side is the bigger half, and it is easy to leave out because it arrives years later. Before you own anything you have put in $44,200 - the down payment plus buying costs.

That is why owning starts so far behind. Sell after one year and the net cost of owning is $63,039 against $23,400 of rent - renting is ahead by $39,639, and the round trip alone is 86% of that gap.

Year by year

At flat prices, owning closes the gap slowly: each year the loan balance falls and rent rises, but the round trip has to be paid back out of those small annual gains. The net cost of owning drops below the rent paid in year 16. At +3% a year, rising value adds equity every year and owning catches up in year 6.

The insight: the break-even year belongs to an assumption

Here is the same house under seven appreciation rates, with the result of selling after 5 and 10 years:

Read down the second column. From -1% to +5% a year, the break-even year runs from 18 years to 3. Every other input is identical. The appreciation rate is the one input in the calculation that you cannot control, cannot negotiate and cannot know in advance - and on its own it moves the answer across a 15-year range.

The holding-period columns show the same thing from the other side. Sell after 5 years and renting comes out ahead in every row up to +3%: by $52,514 at flat prices, and still by $4,516 at +3%. Sell after 10 years and the rows split: renting is ahead by $43,756 at flat prices, buying is ahead by $53,792 at +3%.

So a rent vs buy answer is only meaningful with two numbers attached: an appreciation rate and how long you will stay. Change either and the answer can flip.

Compare: the cost you can negotiate

Selling costs are a large figure you do have some say over. Here is the same model with three selling-cost percentages:

Dropping selling costs from 7% to 5% saves $6,800 at sale and moves the flat-price break-even by 1 year, to 15 years. Worth knowing, and worth asking about - but small next to the 10-year swing from appreciation.

Rent vs buy calculator by location

Location changes the inputs, not the formula. The ones that move with where you live are the price, the rent for a comparable home, the property tax rate, the transaction costs, and whatever appreciation you are willing to assume. A quick way to see how much rent matters is to hold the house fixed and change only the rent:

The price-to-rent ratio in the second column is the price divided by a year of rent. In this example, the same $340,000 house breaks even in 10 years at flat prices if comparable homes rent for $2,300, and in 23 years if they rent for $1,600. A place where rent is low relative to prices pushes the break-even out; a place where rent is high pulls it in. Look up the price and rent for comparable homes where you are, use your local tax rate, and ask a lender and an agent for the buying and selling costs - then run the formula above.

How these were calculated

Month by month, the loan accrues interest at the annual rate divided by twelve and the fixed payment of $1,934.13 covers that interest first, reducing the balance with the rest. Each year adds property tax, maintenance (on the home’s value at the start of that year) and insurance, and rent rises by 3%. At the end of each year, the home’s value is the price grown by the appreciation rate; equity is that value minus selling costs minus the loan balance. The break-even year is the first year-end where cash paid out minus equity is at or below rent paid. Results are in whole years, up to 30.

The model is deliberately simple. It does not count any mortgage-interest tax deduction, which would favor buying, and it does not credit the renter with investing the $44,200 the buyer put in up front, which would favor renting. Both move the answer, and both depend on your circumstances.

Every figure was computed twice - once by the year-by-year code behind the products below, and once by an independent closed-form calculation of the loan balance and cumulative rent - and the two agree to the cent. All inputs, including the 3% and 7% transaction costs and the appreciation rates, are illustrative. This is not financial advice, and it is not a recommendation to rent or to buy.

If you want to put your own price, rent and cost percentages through the same round-trip model, the guide below is built on it, and the calculator pack has the payment, true monthly cost and round-trip sheets as editable spreadsheets.