Rent vs buy breakeven calculator

Inputs

Home price	$500,000
Down payment %	20%
Mortgage rate %	6.5%
Equivalent monthly rent	$2,400
Rent inflation %	3.5%
Home appreciation %	3.5%
Annual maintenance % of home value	1.5%
If renting: down payment invested at %	7%

Supporting metrics

Year-1 cost: buying	$37,839
Year-1 cost: renting	$28,800
10-year total cost: buy	$265,362
10-year total cost: rent	$263,179

About this calculator

Rent vs buy — the breakeven year

Three forces decide which is cheaper:

Buy is front-loaded: down payment, closing costs, year-1 maintenance, mortgage interest before principal kicks in
Rent is back-loaded: rent inflates over time (3-5%/year), and you never build equity
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.

FAQ

Why does the calc treat the down payment as an investment?

Because the alternative IS investing it. If you're not buying, that $100k earns the market return in an index fund. The 'cost' of buying isn't just the mortgage — it's also the forgone investment growth on that capital. Comparing rent vs buy without this shows a misleading buy-favorable answer.

What about leverage — doesn't the mortgage amplify returns?

Yes, and the calc partially captures this through home appreciation on full home value while you only put 20% down. A 3.5% home appreciation on a $500k home = $17,500/year, which on a $100k down payment is 17.5% return. That's the leverage advantage. But it's offset by maintenance, taxes, and interest costs.

Should I include property taxes separately?

The 'maintenance %' input is meant to capture maintenance + property tax + insurance combined. Use 2-3% in high-tax states (NJ, IL, TX), 1.5% in low-tax states (HI, AL, LA). The breakdown matters less than the total.

What if I plan to refinance?

Refinancing reduces mortgage cost going forward and changes the breakeven date earlier. This calc uses a single rate for simplicity. If you can credibly refinance to 5% from 7% in year 3, redo the calc with 5% to see the post-refi case.