Rent against buy: the break-even year
Two cost paths: rent paid so far, and what owning has cost once selling hands money back. Where they cross is the break-even year. On the settings it opens with, a 6.5 percent mortgage and 3 percent yearly growth in rent and home value, owning overtakes renting in year 7. Figures are illustrative.
Buying overtakes renting in
Year 7
Over 10 years owning costs $206,738 and renting costs $247,620, so owning is ahead by $40,881.
Owning, after what the sale gives backRenting, rent paid so far, dashed
Illustrative teaching figures. Owning puts 20% down on a 30 year loan, spends 2.4% of the value each year on tax, insurance and upkeep, pays 2% to buy and 6% to sell. Rent, home value and running costs all rise at the growth rate you set. The year the lines cross swings hard on those assumptions, so this is a comparison of two cost paths rather than a verdict on either one.
In short
- Drag the marker along the years axis to set how long you stay.
- Read the two running totals above the chart for that horizon.
- Move the price, rate, rent and growth sliders and watch the break-even year jump.
- Pull yearly growth down to zero and watch the crossing leave the chart entirely.
What each line counts
The dashed line is rent. It starts at zero and climbs a little faster every year, because the rent rises at the growth rate you set.
The solid line is owning, and it is net rather than gross. It adds the deposit, the cost of buying, every mortgage payment, and tax, insurance and upkeep at 2.4 percent of the value a year. Then it takes away what selling would hand back: the home at its grown value, less 6 percent to sell, less whatever is still owed. That last part is the equity built by paying the loan down and by the value moving, and it is why the owning line bends flat while the rent line keeps climbing.
At year zero the owning line does not start at zero. Buying costs 2 percent and selling costs 6 percent, so buying and selling on the same day would cost 8 percent of the price with nothing to show for it. That gap is the head start renting gets.
The crossing moves further than you expect
Growth moves it most. Hold the price, rate and rent where they open and change only the growth rate: 3 percent breaks even in year 7, 2 percent in year 12, 1 percent in year 24, and at zero growth owning never catches up inside 30 years at all.
The mortgage rate does almost as much. At 4 percent the crossing comes in year 3, at 6.5 percent in year 7, at 8 percent in year 11, at 10 percent in year 19.
Rent works the other way, since it is what owning is being measured against. Drop it by a third and the crossing slides out to year 16. Raise it by a third and it arrives in year 3. Price behaves the same way in reverse: a smaller home against the same rent crosses almost at once.
A comparison, not a verdict
Every figure here is arithmetic on the assumptions you set, and four of those assumptions are yours to move. The rest are held fixed to keep the picture readable: 20 percent down, a 30 year loan, 2.4 percent of the value a year in running costs, 2 percent to buy and 6 percent to sell.
Because the answer flips on those inputs, treat the year on the headline as the output of one scenario rather than as a result. The useful reading is not which line wins, it is how long you have to stay before the answer changes, and that is the number the marker on the years axis is for.
This is educational material, not financial advice. The two paths it draws price cash cost and nothing else, and how long you expect to stay is the assumption the whole comparison hangs on.
Common questions
What is the break-even year?
It is the first full year where owning has cost less in total than renting over the same stretch. Before it, renting is the cheaper path. After it, owning is, and the gap widens every year the two lines stay apart.
Why does owning start so far behind?
Transaction costs. Buying is priced at 2 percent here and selling at 6 percent, so the chart begins with owning already 8 percent of the price down. Those costs are paid once, which is why a longer stay spreads them thinner and a short stay cannot absorb them.
Does the chart say whether to buy?
No. It shows what two cost paths do under one set of assumptions, and the year they cross swings by more than a decade on the growth rate and the mortgage rate alone. It is educational material, not financial advice, and it is a comparison rather than a recommendation.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.