The rent-vs-buy question is not a values question. It is not "am I a homeowner kind of person." It is a math question, and the math is not hard. The problem is that most calculators cheat — they leave out inputs that would embarrass the answer they want to give you.
Here are the five numbers that decide the outcome, and how each one bends the break-even year up or down.
1. The opportunity cost of your down payment
If you put $80,000 down on a house, that $80,000 is not free money you already had lying around. It is capital that could have been invested. In a global stock index at the long-run real return of about 5 percent per year, $80,000 becomes about $130,000 in ten years. That $50,000 of foregone growth is a real cost of owning, and it does not show up on your mortgage statement.
Most calculators either ignore this or use a laughably low number for the expected return on the alternative. If you use 1 percent, buying always wins. If you use 8 percent, renting almost always wins. Pick a number you would actually defend in front of a skeptical friend — historical global-equity real returns are around 5 percent, that is the honest baseline. Bonds are lower. Cash is much lower.
The rule: the down payment is not a sunk cost, it is a portfolio choice. The calculator has to treat it that way.
2. Transaction costs on both sides
Buying a house is not just the sticker price plus the mortgage. In the U.S. you also pay 2–5 percent of the purchase price at closing (title, escrow, lender fees, taxes), and when you sell you pay another 5–7 percent to the agents. On a $500,000 house that is $35,000 to $60,000 you never get back, no matter what the market does.
This is why the honest break-even year is almost never year one, or year two, or year three. Even in a rising market, the transaction costs alone take several years of price appreciation to offset. A calculator that shows buying "winning" at year two is quietly ignoring this.
Renters have transaction costs too — application fees, deposits, moving — but they are usually one to two orders of magnitude smaller. Both sides go into the model. Only one side is decisive.
3. Maintenance, not just repairs
Ask any homeowner what they spent on the house last year and they will say "not much." Ask them what the roof cost, what the HVAC cost, what the water heater cost, what the fence cost, and the number stops being small.
The standard rule of thumb is 1 percent of the home's value per year in ongoing maintenance, amortized over the long run. Some years it is zero. Some years it is $15,000. On a $500,000 house that is $5,000 a year, every year, forever. That number is not optional and it is not negotiable — it is the price of not living in a landlord's problem.
If a calculator uses zero, or 0.25 percent, ask yourself: has the person who built it ever paid for a roof?
4. Property tax and insurance drift
Property tax and homeowner's insurance are usually shown as fixed dollar amounts at the top of the model, and then quietly held flat forever. They are not flat. Property tax follows assessed value, which follows the market, which is the whole reason you thought buying was a good idea. Insurance follows replacement cost, which follows construction cost inflation, which has run well above general inflation for the last decade.
Rent is not flat either — that is the entire pro-buying argument — but neither are the costs of ownership. A model that inflates rent but freezes taxes and insurance is stacking the deck.
The honest treatment: pick an inflation rate for each line and apply it consistently. If you assume 3 percent rent growth, you cannot assume zero tax growth.
5. The rate at which you would actually stay
The single largest lever in the rent-vs-buy calculation is how long you keep the house. Every additional year amortizes the transaction costs over a longer period and gives compounding time to work in your favor.
But nobody knows how long they will stay. Most people wildly overestimate it. Median U.S. tenure in a starter home is around seven years — not the thirty years the mortgage assumes, and not the fifteen years the buyer usually plans for.
A useful trick: instead of picking a stay-length, run the calculator at five, seven, ten, and fifteen years, and look at the break-even year. If the break-even is at year twelve and you honestly think you might move at year six, the answer is not "buying wins because the break-even is at year twelve." The answer is "you would probably lose."
Putting it together
The break-even year is a single number that folds all five inputs together and tells you: beyond this year, buying is cheaper; before this year, renting was cheaper. It is the only comparison that respects your actual financial life — the alternative investment, the transaction friction, the ongoing costs, and the timeline you would actually live.
A defensible break-even year does not require guessing at the market. It requires being honest about the inputs you already control.
That is the calculator we set out to build. Every default is visible. Every assumption is editable. Every conclusion is one sentence you can defend to a skeptical friend.
Recommended reading
One book to keep on the shelf while you run the numbers. As an Amazon Associate we earn from qualifying purchases — at no extra cost to you.
- House Poor No More — Romana King. A rare book on housing that treats the home as a financial decision first and a lifestyle decision second — same posture as this calculator, longer form.