Net worth comparison: - Buyer: Home value (with appreciation) minus remaining mortgage balance - Renter: Down payment invested and compounded at the investment return rate
Break-even year: The first year when buyer net worth exceeds renter net worth
Note: Transaction costs such as closing costs, agent commissions, and capital gains tax are not included and should be considered separately.
Frequently Asked Questions
Buying tends to be better when you plan to stay long-term (7+ years), expect home appreciation, have low mortgage rates, and when home prices are reasonable relative to rents. The break-even point typically ranges from 5-10 years depending on local market conditions.
Renting can be smarter when you expect to move within 5 years, investment returns exceed home appreciation, housing prices are elevated relative to rents (high price-to-rent ratio), or when you need flexibility. Investing the down payment can sometimes outperform home equity.
The break-even year is when the buyer's net worth (home equity) surpasses the renter's net worth (invested savings). Before this year, renting may be cheaper; after it, buying builds more wealth. The break-even depends heavily on home appreciation, mortgage rate, and investment returns.
The investment return rate represents what a renter could earn by investing the down payment in financial assets instead. Common benchmarks: US stock market (S&P 500) long-term average ~7-10%, diversified global portfolio ~6-8%, conservative bonds ~3-4%. Use a rate appropriate to your actual investment strategy.
Closing costs (typically 2-5% of the purchase price) include title insurance, inspection fees, appraisal, and attorney fees. Add these to the down payment field for a more accurate comparison. Selling costs (agent commission ~5-6%) should also be factored in if you plan to sell.
Price-to-rent ratio = Home price Γ· Annual rent. A ratio above 20 generally favors renting; below 15 generally favors buying. For example, a $500,000 home with $2,000/month rent has a ratio of 20.8, suggesting renting may be competitive. Use this calculator for a deeper analysis.
Yes. The buyer's net worth is calculated as the appreciated home value minus the remaining mortgage balance each year. This reflects growing equity from both mortgage paydown and home price appreciation.
In the US, mortgage interest may be tax-deductible if you itemize deductions. This calculator does not include tax benefits. If you itemize, the effective mortgage rate is lower, which slightly favors buying. Consult a tax advisor for your specific situation.
US home prices have historically appreciated about 3-4% annually on average, though this varies significantly by location and time period. Use local data for your area. For scenario analysis, run the calculator with conservative (1-2%), moderate (3-4%), and optimistic (5-7%) appreciation rates.
Yes for condos (add HOA fees to the monthly insurance/maintenance field). For investment properties, the analysis is more complex β rental income and tax implications change the calculus significantly. This calculator is optimized for primary residence decisions.