Buy vs Rent Break-Even
Cumulative ownership cost minus equity, compared to cumulative rent.
Horizon point = first month where cumulative rent ≥ cumulative ownership cost minus equity built. Inputs: rate, appreciation, maintenance.
Buying a home is only cheaper than renting after enough years. The horizon point is that year — where cumulative rent overtakes cumulative ownership cost net of equity built.
Part of: Saving & Spending Calculators
Quick answer
Horizon point = first month where cumulative rent ≥ cumulative ownership cost minus equity built. Inputs: rate, appreciation, maintenance.
Key points
- ▸ Monthly ownership cost = mortgage payment + property tax + maintenance. Equity grows each month as principal is paid.
- ▸ Net ownership cost = cumulative ownership cost − equity built − home appreciation.
- ▸ Rent cost compounds annually at a typical 2–4% escalator. Model the escalator honestly — ignoring it flatters renting.
- ▸ Interest rate dominates the first decade; appreciation dominates the second. A 1% rate difference can shift the horizon by 3–5 years.
- ▸ If the horizon never arrives inside the 30-year term, the inputs favor renting — usually high rate + low appreciation.
Examples
- Typical case$400k home, 20% down, 6.5% rate, $2.2k rent, 3% appreciation, 1% maintenance → horizon around year 8.
- High-cost marketSame home, rent $1.8k, 2% appreciation → horizon pushes past year 14. Renting wins unless you stay long.
- Rate-sensitiveDrop rate to 5%, keep everything else → horizon shrinks to year 6. Rate moves the line hard.
When to use which tool
- Rent vs Buy CalculatorMain tool — sliders for rate, appreciation, maintenance, down payment. Shows the exact horizon year.Estimate the year buying a home becomes cheaper than renting after mortgage interest, maintenance, selling costs, and cash opportunity cost.
- Mortgage CalculatorFor the pure monthly payment before combining with rent.Calculate your monthly mortgage payment with taxes, insurance, HOA, and PMI. See total interest and what each 1% rate change really costs.
- Mortgage Extra Payment CalculatorFor modeling how prepayment shifts the horizon earlier.See how extra payments change your payoff date and total interest. Monthly, annual, or one-time — all scenarios side by side.
Related
- Rent vs Buy CalculatorEstimate the year buying a home becomes cheaper than renting after mortgage interest, maintenance, selling costs, and cash opportunity cost.
- Mortgage CalculatorCalculate your monthly mortgage payment with taxes, insurance, HOA, and PMI. See total interest and what each 1% rate change really costs.
- Mortgage Extra Payment CalculatorSee how extra payments change your payoff date and total interest. Monthly, annual, or one-time — all scenarios side by side.
- The CrossoverThe exact month when a monthly subscription overtakes a one-time lifetime purchase. Opportunity-cost toggle included.
Frequently asked questions
› Why does appreciation get added to equity? Troubleshooting
Because selling realizes both the principal paid down AND the market gain. The net-ownership line reflects what you would net if you sold at that month.
› Is this after-tax? Trust & accuracy
No — model inputs are pre-tax. Mortgage interest deductions narrow the horizon by months, not years; the tool ignores them for simplicity.
› How should I use this guide with a Kefiw tool? How-to
Use the guide as the plan and the linked Kefiw tool as the check. Read the steps first, try the move manually, then use the tool to compare outputs, catch edge cases, and decide whether the result actually fits your task.
› What mistake do tool guides help avoid? Troubleshooting
Tool guides help avoid using a utility mechanically without understanding what you are trying to accomplish. Most word, writing, and text utilities are fast, but speed can hide context mistakes. Know whether you are solving a puzzle, cleaning copy, drafting a line, or checking a rule.
› Can a tool guide help me learn the skill? How-to
A tool guide can help you learn if you pause before accepting the output and ask why it worked. Compare your first guess with the tool result, look for the rule or pattern, and repeat that review. Passive copying solves one task; active review builds the skill.