Three assumptions decide this, and only one is about the house
Ask whether it is cheaper to rent or buy and the honest answer is that the question is under-specified. The same home, the same rent and the same loan can produce a break-even in year 4 or no break-even at all, depending on three numbers that are not properties of the property: how fast the home appreciates, what the renter earns on the money they did not spend, and how long you actually stay.
Start with appreciation, because it is the one people argue about. Holding everything else at the defaults — $420,000 home, 10% down, 6.50% for 30 years, $2,300 rent — the outcome over thirty years looks like this:
| Home price growth | Break-even year | Position at year 30 |
|---|---|---|
| 0.00% a year | never | −$139,290 |
| 1.00% a year | never | −$3,420 |
| 2.00% a year | year 21 | +$177,628 |
| 3.00% a year | year 11 | +$418,199 |
| 4.00% a year | year 6 | +$736,981 |
| 5.00% a year | year 4 | +$1,158,261 |
Thirty-year window. Rent inflation 3.00%, investment return 5.00%, selling costs 7.00%.
Two things stand out. The first is the size of the swing: the step from 1.00% to 2.00% appreciation is worth $181,048 over three decades, and the step from 3.00% to 4.00% is worth more still. The second is where the cliff sits. Between 1.00% and 2.00% the answer flips from never to year 21 — and 1.00% lands just $3,420 short after thirty years, which is a rounding error against the size of the decision.
This is why a single break-even figure should be treated as a range with a wide middle, not a fact. Anyone who tells you buying wins after seven years has picked an appreciation rate and is not showing you the column above.
The assumption nobody tests: what the renter earns on the money
Appreciation is unknowable. The return on invested cash is not — it is the only input in the whole comparison that the person asking the question controls directly, and it is the one almost every rent-versus-buy article omits.
It matters because renting is not free; it is cheaper. Owning this home costs about $3,274.22 a month in the first year against $2,300 of rent, so the renter has $974.22 a month left over. What that money does determines whether the comparison is close or not close at all.
| Return on invested cash | Break-even year | Position at year 30 |
|---|---|---|
| 0.00% a year | year 6 | +$843,301 |
| 2.00% a year | year 7 | +$734,609 |
| 4.00% a year | year 9 | +$551,574 |
| 5.00% a year | year 11 | +$418,199 |
| 6.00% a year | year 14 | +$246,292 |
| 8.00% a year | never | −$258,799 |
Appreciation held at 3.00% a year. A 0% return means the difference sits in a current account.
The range is wider than the appreciation table, and both ends are defensible. A saver who leaves the difference in cash wins the comparison in year 6. An investor who earns 8.00% a year never loses it — renting finishes thirty years $258,799 ahead. Between those two accounts sits the same house, the same rent and the same mortgage.
The break-even depends on the window you ask about
A break-even year is not an absolute property of a purchase; it is the answer to “by when, if I hold that long.” Change the holding period and both the position and the verdict move, even though nothing about the house changed.
| Years held | Position at exit | Break-even within that window |
|---|---|---|
| 3 years | −$34,501 | never |
| 5 years | −$28,468 | never |
| 7 years | −$20,113 | never |
| 10 years | −$2,402 | never |
| 15 years | +$44,744 | year 11 |
| 20 years | +$121,798 | year 11 |
| 30 years | +$418,199 | year 11 |
Appreciation 3.00%, investment return 5.00%. Position is the cumulative advantage of owning; negative means renting is ahead.
The row worth staring at is 10 years: buying is $2,402 behind, and it has not yet broken even. One more year of ownership turns that into +$5,097. The final column reads “never” for every holding period shorter than the true break-even, which is the correct answer to a narrower question — it does not mean buying is worse forever, only that it is worse if you leave before year 11.
This is also the reason a fifteen-year and a thirty-year study of the same market can appear to contradict each other. Our rent versus buy walkthrough tests a fifteen-year window and reports that 2.00% appreciation never catches up. That is true inside fifteen years. Over thirty it catches up in year 21. Both statements are correct; they answer different questions.
What this model does not price
The arithmetic above is complete for money, and money is not the whole decision. Five things sit outside it, and each one pushes in a known direction:
- The cost of a forced sale. The model assumes you sell in the year you chose. If a job moves you in year 3, you pay the selling costs early and forfeit the years that would have recovered them. Every early exit is worse than the table shows.
- Repairs are not evenly spread. Maintenance is modelled as 1.00% of the price every year. In reality it arrives as a new roof in one year and nothing for the next four.
- Liquidity. A down payment and closing costs are locked into one asset in one place. The renter’s portfolio is not. This is not a number and does not appear in any column, but it is a real cost of owning.
- Renters insurance. A modest monthly premium, and not counted here — it is small, but it is not zero, and leaving it out slightly flatters renting.
- A falling market. The model allows appreciation down to zero. Negative appreciation is possible and is covered by setting a negative figure only if the tool allows it; the honest way to read the 0.00% row is as the generous end of a bad scenario.
How to use the number
The useful move is not to read the break-even and act on it, but to invert the question: what would have to be true for this purchase to work? If the answer is “the home appreciates 4% a year for six straight years,” you now know how much of the decision rests on a forecast you cannot make, and the honest response is to plan to stay long enough that the forecast matters less.
From here, two pages do the rest. The affordability calculator tells you what price your income supports, which is a separate question from whether that price is a good buy. And the amortization schedule shows how slowly the balance falls in the early years — the reason the first decade of owning is almost all interest, and the reason the break-even sits where it does.
Frequently asked questions
How long does it take to break even on a house?
In this model, eleven years. On a $420,000 home bought with 10% down at 6.50%, against $2,300 of rent, owning finishes year one $38,538 behind renting and is still $2,402 behind at the end of year ten. It crosses over during year 11 and is $44,744 ahead by year 15. The delay is structural rather than unlucky: $52,500 of cash goes out on day one and the benefit arrives monthly, so the early years are always the worst.
Why does 2% appreciation give a different answer from 3%?
Because the break-even is extremely sensitive to that one input. At 3.00% a year buying pulls ahead in year 11 and is $418,199 ahead after thirty years. At 2.00% it takes until year 21 and the thirty-year position drops to $177,628. At 1.00% it never catches up inside thirty years and finishes $3,420 behind. One percentage point of annual appreciation is worth roughly $181,048 of outcome over three decades, and nobody can forecast it.
Should the renter be credited with investing the difference?
It depends on whether the renter actually does it, and the model makes that assumption visible rather than burying it. Owning this home costs $3,274.22 a month in the first year against $2,300 of rent, so the renter is credited with investing $974.22 a month at 5.00%. Push that return to 8.00% and renting stays ahead for the entire thirty years, finishing $258,799 better off. Set it to zero and buying wins by year 6. The assumption is doing more work than most people expect.
Is buying better if I plan to move in five years?
On these numbers, no — and the gap is not marginal. Selling after five years leaves buying $28,468 behind renting, largely because a round trip through the property costs 2.50% upfront and 7.00% on exit, which is $10,500 plus a share of the sale price before any interest is counted. The model does not price the cost of a forced sale, so if there is any chance you move sooner than planned, the real number is worse than the one shown.
Does the calculator include the cost of selling?
Yes, and it has to, or the comparison flatters buying. The default assumes 7.00% of the sale price goes to agent commission and fees at exit, plus 2.50% of the purchase price in closing costs at entry. Selling costs are the single largest reason the break-even lands in year 11 rather than year 5. If you would sell through a flat-fee listing instead, lower the selling cost figure and watch the answer move.
Other calculators
- Home affordability calculator — Works the mortgage question backwards: start from your income, debts and down payment, and find the price you can actually carry rather than the price a lender will approve.
- Mortgage calculator — Monthly payment with property tax, home insurance, HOA and PMI folded in — the number that actually leaves your account, not just principal and interest.
- Amortization schedule — The full month-by-month and year-by-year breakdown of a fixed-rate loan, and how much interest an extra payment removes from the end of it.
- Personal loan calculator — Unsecured borrowing at the rates lenders actually quote, with the origination fee maths that decides whether the money is worth taking.
Guides that go with it
- Rent vs buy: the break-even year — Buying is $38,538 more expensive than renting in year one and does not catch up until year 11. The full model, and how the answer moves when appreciation changes.
- How much house can I afford? — Why the price a lender approves is not the price you should pay, how the debt-to-income rules work, and what the monthly figure has to cover beyond principal and interest.
- How loan amortization works — The formula term by term, a worked month-by-month example, when principal finally overtakes interest, and why extra early payments save so much.
This calculator is educational and is not financial advice, and its output is an estimate — lenders apply their own fees, rounding rules and day-count conventions. Every figure was produced by the same calculator code and independently recomputed before publication. Spot an error? Tell us — see also our disclaimer.