Compare the true 5 and 10-year cost of renting against buying. See exactly when buying becomes cheaper and how much equity you build.
Input your current or expected monthly rent and annual rent increase percentage.
Enter the home price, down payment, interest rate, property tax, insurance, and HOA fees.
View 5-year and 10-year total cost comparisons and the exact break-even year when buying becomes cheaper than renting.
The break-even point — when cumulative buying costs equal cumulative renting costs — typically occurs between 3 and 7 years depending on your market, home price appreciation, and rent vs mortgage payment difference. Our calculator shows this exact point for your inputs.
Buying costs include: mortgage payment (P+I), property taxes, homeowners insurance, HOA fees, PMI if applicable, maintenance (typically estimated at 1-2% of home value annually), and opportunity cost on the down payment. These are offset by equity building and appreciation.
Renting costs include: monthly rent (growing annually), renters insurance, and the opportunity cost of the money that would have been a down payment if invested. Renting has no equity building but preserves flexibility and avoids maintenance costs.
Historical US average home appreciation is 3-4% annually, but this varies enormously by market. In expensive markets with high price-to-rent ratios, renting and investing the difference often performs comparably or better than buying, especially short-term.
Price-to-rent ratio = home price / annual rent. A ratio below 15 generally favors buying; above 20 generally favors renting. In expensive coastal cities this ratio often exceeds 30, meaning renting may be more economical despite the common pressure to buy.
The rent increase rate dramatically affects results over 10+ years. At 3% annual increases, a $2,000 rent becomes $2,687 in 10 years. At 5%, it becomes $3,258. Over time, a fixed mortgage payment becomes increasingly cheap relative to rising rents.
Mortgage interest deduction helps buyers, but with the 2017 Tax Cuts and Jobs Act raising the standard deduction, fewer people itemize. Only those with itemized deductions above the standard deduction ($27,700 for married 2024) benefit from the mortgage interest deduction.
Equity comes from two sources: principal paydown (your mortgage payments reducing the balance) and appreciation (the home value increasing). In the first years of a mortgage, equity builds slowly because most payments are interest. After 5-10 years, equity growth accelerates.
