Every honest rent-vs-buy comparison ends with one number: the break-even year. Before it, renting was cheaper. After it, buying was cheaper. That is the whole answer.
Everything else in the calculator — the monthly cash flow, the wealth trajectory, the equity chart — is there to explain how that single number was computed. If you leave with only one thing, leave with the break-even year.
The mental model
Imagine two versions of yourself, side by side, starting on the same day with the same amount of money.
- Renter-you rents an equivalent home, and invests the down payment in a diversified portfolio. Every month, they pay rent and invest whatever they would have paid in mortgage-plus-taxes-plus-maintenance minus rent (or vice versa if that number is negative).
- Owner-you buys the house, pays the mortgage, pays taxes and maintenance, and builds equity. When they sell — the day you check the answer — they pay closing costs on the sale.
At every point in time you can ask: how much money does each version of you have, all in? Renter-you's number is their portfolio. Owner-you's number is the sale value of the house, minus the mortgage payoff, minus selling costs, plus whatever cash they have on the side.
The break-even year is the first year in which owner-you's number is bigger than renter-you's number. That is it. That is the whole definition.
Why it is not year one
You will never break even in year one, or year two, or usually year three. Two reasons:
- Closing costs on the buy side. You start the buy scenario several thousand dollars behind, from title, escrow, lender fees, and prepaid interest. Renter-you does not pay those.
- Selling costs on the exit. The break-even calculation assumes owner-you sells at the end of the horizon. That sale costs 5 to 7 percent to agents and 1 percent or so in transfer tax and misc. On a $500,000 home, that is $30,000 to $40,000 gone at the exit.
Between the two, buying digs itself a hole of roughly 8 to 10 percent of the home price on day one that appreciation has to fill before you are even at zero. In a market growing at 3 percent per year, that takes three to four years of pure price growth just to break even on the friction.
What makes the break-even year move earlier (buying wins sooner)
- Higher rent relative to the mortgage payment. If renting the same place is expensive, every month owner-you saves on cash flow is a month owner-you catches up faster.
- Higher home appreciation. The house gains value; the mortgage does not. Every dollar of appreciation goes to owner-you.
- Lower closing and selling costs. Cheaper transaction friction means less to make up.
- Lower alternative investment return. If the portfolio grows slowly, the down payment is not costing owner-you very much to lock up.
- Lower maintenance and property tax growth. Ownership costs stay a smaller drag.
What makes it move later (renting wins for longer)
- Higher home price relative to rent. Expensive-to-buy-cheap-to-rent markets punish owners. This is most of coastal America.
- Higher alternative investment return. Every dollar in the walls of the kitchen is a dollar not compounding in the market. The stronger the market, the stronger the rent case.
- Higher maintenance, tax, or insurance drift. Ownership has more line items that inflate with the economy.
- Slower home appreciation. In a flat market, the mortgage still comes due but the equity is not growing.
- Rising mortgage rates locked in on the buy. A 3 percent mortgage in a 7 percent world is an asset; a 7 percent mortgage in a 7 percent world is not.
What the number does not mean
The break-even year is not a prediction that you will stay that long, or a guarantee that the market will behave. It is a statement about your assumptions: given the numbers you put in, the crossover happens here. If you change the numbers, the crossover moves.
The most useful way to use it is not "buy if the break-even year is soon enough" — it is "what would have to be true for the break-even year to be earlier than the year I actually plan to move?" If your break-even year is twelve and you honestly think you will move in six, the answer is renting even if the model looks otherwise appealing.
If you can pull the break-even year in by nudging one input to a value you can defend — say, your rent is actually growing faster than you thought — great, use that value. If you can only pull it in by lying to yourself about the market, you have your answer.
What the calculator shows you
The calculator returns your break-even year in a single sentence, in plain English, with the horizon you chose. Below it, a chart shows both wealth trajectories over time so you can see the crossover with your own eyes. Below that, every input is visible and editable — so if a number changes the answer, you know exactly which one.
That is the whole product. One number, one sentence, all your assumptions on the same page.