When Does Buying Beat Renting? Finding Your Break-Even Year
Last updated July 18, 2026
Your break-even year is the first year in which selling your home would leave you with more net worth than renting the same home and investing every dollar the cheaper path freed up — after paying roughly 6% of the sale price to exit. In our model’s default US scenario ($420,000 home, 20% down, 6.5% thirty-year mortgage, $2,100 comparable rent, 7% investment return), that year never arrives within 30 years. Cut the mortgage rate to 4% and it arrives in year 6.
What does “break-even year” actually mean?
The break-even year is a net-worth crossover: the first year the buyer’s equity, net of selling costs, catches up to the portfolio the renter built by investing the down payment, the closing costs, and every month the renting path was cheaper. It is not the year your mortgage payment matches local rent — that is monthly-cost parity, a different and far less useful milestone.
Monthly-cost parity misleads in both directions. In our default scenario, the owner’s true year-1 cost is $3,067 a month — $2,124 of principal and interest plus property tax, insurance, and maintenance — against the renter’s $2,115. Rent growing 2.5% a year will eventually pass the owner’s outlay, but the moment it does tells you nothing about who is wealthier: it ignores the $96,600 (20% down plus ~3% closing costs) the renter kept invested, the principal the owner has quietly retired, and the ~6% haircut the owner pays on exit. The two milestones can also land a decade apart — at a 4% rate, our net-worth break-even arrives in year 6, long before rent growth would catch the owner’s all-in monthly cost under the same assumptions. Quick screens like the 5% rule are good for spotting which side is cheaper this year; only a full net-worth model tells you when the lines cross. Our methodology charges selling costs in every year of the comparison — equity counts only for what you could walk away with — which is why our break-even years run later than most calculators’.
Why does owning start roughly 9% in the hole?
Transaction costs. Buying costs about 3% of the price in closing costs (loan fees, title, escrow), and selling costs about 6% in agent commissions and fees — a ~9% round trip, or roughly $37,800 on a $420,000 home. Early mortgage payments barely dent that: at 6.5%, the first year’s $25,488 of payments retires only about $3,700 of principal.
The exit cost grows with the home, too. After ten years of 3% appreciation, the $420,000 house is worth about $564,000, so the 6% haircut is now roughly $34,000. Climbing out of the hole relies on the slow tools — appreciation and amortization — while the renter’s portfolio compounds from day one. That is why stays under about five years are rarely buy territory at any mortgage rate, and why “when does buying win?” is really a stay-length question.
When does buying break even in our model?
In the default scenario, never — not within the 30 years we model. At a 6.5% mortgage, roughly where Freddie Mac’s weekly survey put the 30-year average in mid-2026 (about 6.7%), renting-and-investing wins at every stay length, and its lead widens rather than shrinks.
| If you stay… | Winner at 6.5% | Net-worth margin (our model) |
|---|---|---|
| 5 years | Renting + investing | ~$49,000 |
| 10 years | Renting + investing | ~$67,000 |
| 30 years | Renting + investing | ~$389,000 |
Assumptions: $420,000 home, $2,100 starting rent growing 2.5%/yr, 20% down, 3% home appreciation, 7% total investment return, standard deduction.
Read the direction of that last column carefully. The gap is not narrowing toward some distant crossover; it compounds from $49,000 to $389,000. Staying longer does not rescue this purchase.
Now change one number. Same house, same rent, same everything, but a 4% mortgage: principal and interest drop from $2,124 to about $1,604 a month, buying wins by roughly $38,000 over a 10-year stay, and the net-worth lines cross in year 6. One input moves break-even from “never” to “year 6,” which is why any break-even claim that doesn’t state the mortgage rate is meaningless. For where current rates leave the answer, see rent vs buy in 2026.
Why doesn’t buying always win eventually?
Because the renter’s savings compound too. The “eventually” argument quietly assumes the renter spends the monthly difference; invest it instead and there may be no crossover at all. In our default scenario the renter’s lead grows from ~$49,000 at year 5 to ~$389,000 at year 30 — time makes renting look better, not worse.
The argument leans on one true fact and one hidden assumption. The true fact: principal and interest are frozen for 30 years while rent rises. But the renter starts with a $96,600 head start that compounds to roughly $190,000 in ten years at 7% before tax, plus about $950 a month of invested savings in the early years — and the owner’s other costs (property tax, insurance, maintenance) keep climbing with the home’s value even while P&I stands still. A portfolio with that much fuel grows faster in dollars than home equity, even as the monthly gap closes. Note that our model is not stacked against owners: opportunity cost is symmetric, so in any year owning is cheaper, the owner’s side invests the difference; the home gets its Section 121 capital-gains exclusion at sale, while the renter’s portfolio pays capital gains tax. Renting still wins the default scenario. The full teardown of this myth is in is buying always better than renting.
What moves your break-even year the most?
The mortgage rate and the rent-to-price ratio, in that order for most people. In our model, the tipping-point rent — the rent above which buying beats renting the default $420,000 home over ten years — climbs about 50% as rates rise from 4% to 8%:
| Mortgage rate | Rent above which buying wins ($420k home, 10-yr stay, our model) |
|---|---|
| 4% | $1,890/mo |
| 5% | $2,067/mo |
| 6% | $2,340/mo |
| 6.5% | $2,468/mo |
| 7% | $2,590/mo |
| 8% | $2,830/mo |
The default rent is $2,100. At 4% that clears the $1,890 bar, so buying wins; at 6.5% it falls $368 short of $2,468, so renting wins. The rate moved; the verdict followed.
The same ratio logic separates whole markets. An expensive metro — a $1.1M home renting for $3,800, just 0.35% of the price per month — favors renting by about $560,000 over 15 years in our model, even for a married couple itemizing deductions. An affordable market — a $220,000 home renting for $1,600, about 0.73% per month — flips to buying over ten years at the same 6.5% rate. Before anchoring on national headlines, check your own market with the price-to-rent calculator.
One caution about fragility. In the default scenario, no single assumption moved by one point — appreciation, rent growth, returns, or rate — flips the verdict; the ~$67,000 ten-year margin is sturdy. At 4%, one point of home appreciation or mortgage rate does flip it. Break-even years near the boundary are estimates, not promises: read “year 6” as “roughly years 5-8, run the sensitivity.”
How do I find my break-even year?
Put your real numbers into the calculator and read the year the two net-worth lines cross. The break-even year is intensely local — it depends on your price, your comparable rent, your quoted rate, your taxes, and your stay length, not the national defaults in this guide.
Four inputs deserve most of the care:
- Comparable rent. Use rent for the same home you would buy — size, condition, neighborhood — not your current smaller apartment. Overstating it is the most common way people talk themselves into buying.
- Your quoted rate and down payment. Use your actual loan quote, not a headline average. The model handles PMI with automatic cancellation if you put down less than 20%, and supports all-cash purchases.
- Stay length. Be honest about jobs, relationships, and schools. Every table above shows the verdict swinging on this input.
- Taxes. The model compares the standard deduction against itemizing (2026 SALT cap of $40,400, mortgage interest capped at $750,000 of principal) and applies the Section 121 exclusion at sale. Outside the US, the calculator is currency-agnostic — zero out the US tax fields and the mechanics still hold.
Then stress-test the answer: move appreciation, investment return, and the rate one point each way and watch how far the crossover slides. A break-even year that survives that treatment is worth trusting.
Run your own numbers
The default scenario says “never” at 6.5% and “year 6” at 4% — but you don’t live in the default scenario. Load our base case at a 4% rate (/?price=420000&rent=2100&rate=4) to watch a break-even appear in year 6, then swap in your own price, rent, rate, and stay length and see whether a crossover exists for you — and in which year.
Run your own numbers: the calculator recomputes all of this live for your exact scenario — and the methodology page documents every formula it uses.