Personal finance
Buy vs rent break-even
Buying isn’t automatically better than renting, it depends how long you stay. This finds the year owning pulls ahead, opportunity cost and all.
The honest buy-vs-rent question isn’t "is rent throwing money away?"it’s "how many years until buying costs less than renting?" Owning ties up a down payment that could have been invested, and selling costs a chunk on the way out. Stay past the break-even year and buying wins; leave before it and renting was cheaper.
30-year fixed.
What a renter earns on the down payment.
Enter a home price and the rent you'd pay instead.
Worked example
A $400,000 home, 20% down at 6.5%, versus $2,200/month rent, over 10 years:
| Measure | Value |
|---|---|
| Monthly mortgage (P&I) | $2,023 |
| Break-even year | year 9 |
| Net cost of buying over 10 years | $196,982 |
| Net cost of renting over 10 years | $209,758 |
Buying pulls ahead in year 9. Stay longer than that and owning is cheaper; move sooner and renting was the better call. Over the decade, buying consumes $196,982 against renting's $209,758.
Questions
Why isn't renting just "throwing money away"?
Because buying has its own sunk costs, mortgage interest, property tax, maintenance, insurance and selling fees never build equity either. And the down payment a renter keeps invested can grow. The real comparison is total cost of each path, not rent versus principal.
What makes the break-even come sooner?
A lower price-to-rent ratio, faster home appreciation, a lower mortgage rate, and staying longer. Higher investment returns push it later, because the renter's invested down payment works harder.
What isn't included?
The mortgage-interest and property-tax deductions (which help only if you itemize), and the fact that owning often costs more per month, money a renter could invest. Property tax and maintenance are assumed at 1.1% and 1% of value. It's a decision aid, not a precise forecast.
Related tools
- Rental income tax if you'd rent it out instead
- Net worth home equity is part of the picture
- Salary by city housing drives cost of living
A decision aid on stated assumptions, not a forecast. Not financial advice.