Rent vs buy breakeven calculator

Rent vs buy — the breakeven year

Three forces decide which is cheaper:

1. Buy is front-loaded: down payment, closing costs, year-1 maintenance, mortgage interest before principal kicks in
2. Rent is back-loaded: rent inflates over time (3-5%/year), and you never build equity
3. Down payment opportunity cost: while you're parking $100k in home equity, that same $100k could grow at 7% in an index fund

The breakeven year is when cumulative cost of buying equals cumulative cost of renting. Before that year, renting is cheaper. After, buying is cheaper.

Typical breakevens

• Stable/appreciating market, low interest rates: 4-6 years
• High interest rate environment (2024+): 7-10 years
• High-cost cities (SF, NYC): 10-15 years or never with strict math
• Low-cost cities, modest appreciation: 3-5 years

What this calc captures

• Mortgage P&I (30-year fixed)
• Property tax + insurance + maintenance (lumped as % of home value)
• Home appreciation
• Rent inflation
• Opportunity cost of down payment

What this calc skips on purpose

• Mortgage interest deduction: only applies above standard deduction, increasingly rare
• Selling costs (5-7% of sale price): if you sell before year 5-7, often wipes any "buying advantage"
• Lifestyle factors: schools, neighborhood roots, kids' stability, ability to renovate, pet rules
• Inflation hedge: a 30-year fixed mortgage payment is constant in nominal dollars while rent inflates — a real (if intangible) advantage of owning

The honest summary

For a 5-year stay, rent. Selling costs alone usually eat any breakeven gain. For a 7-10+ year stay, buy — most markets break even by then, and the inflation-hedge of a fixed mortgage compounds in your favor. For "I don't know how long," rent. Optionality is worth the ~1-2% annual extra cost.