Buying a $340,000 house instead of renting at $1,700 a month does not pay off in year three. It pays off in year ten.
At year five the buyer is still $26,711 behind. At year seven, $17,890 behind.
And that is the base case with everything going reasonably well — 3% appreciation, a normal rate, ordinary costs. Change appreciation to 1% and the break-even moves to year twenty.
This article is about why the number is later than people expect, and about the single input that decides almost all of it.
A note before you start. This is general education, not financial advice. Every figure is computed by this site's own rent-versus-buy engine. The scenario is representative, not a prediction, and the assumptions are stated in full in section 2 so you can disagree with any of them.
1. The comparison people actually run
Ask someone whether buying beats renting and they will compare two numbers: the mortgage payment and the rent.
In this scenario the mortgage principal and interest is $1,934 a month. The rent is $1,700. A $234 gap — and the natural conclusion is that buying costs slightly more now and builds equity, so it must win quickly.
Here is the all-in first-year monthly cost of owning the same house:
| Monthly | |
|---|---|
| Principal and interest | $1,934 |
| Property tax | $283 |
| Homeowners insurance | $150 |
| Maintenance at 1% of value | $283 |
| Total | $2,651 |
| Rent | $1,700 |
| Gap | $951 |
Components rounded to the nearest dollar; the total is the engine's unrounded figure.
Not $234. $951 a month — $11,412 a year, before a single closing cost.
The $234 comparison is not a small error. It omits three of the four costs of ownership, and it is the single commonest reason people are surprised by how long the break-even takes.
Run the comparison with your own numbers2. The scenario, stated in full
So you can argue with any of it:
| Input | Value |
|---|---|
| Home price | $340,000 |
| Down payment | $34,000 (10%) |
| Interest rate | 6.5%, 30-year fixed |
| Property tax | $3,400/yr (1.0% of value) |
| Homeowners insurance | $1,800/yr |
| Maintenance | 1% of value per year |
| Closing costs to buy | $9,000 |
| Cost to sell | 7% of sale price |
| Appreciation | 3% a year |
| Monthly rent | $1,700 |
| Rent increases | 3% a year |
| Renters insurance | $15/month |
| Return on the renter's un-spent down payment | 5% a year |
Two of those deserve flagging now because they do most of the work.
The renter invests the down payment. A comparison that has the renter spend it is not a comparison — the $34,000 is real money the buyer commits and the renter does not, and assuming it earns something is the only honest treatment. Assuming it earns 5% is a choice, and section 6 shows what other choices do.
And the buyer sells at the end. The break-even is a realised figure. A buyer who never sells never pays the 7%, which is a genuine argument and one section 5 takes seriously.
3. What the years actually look like
| Year | Renter's net cost | Buyer's net cost | Buying costs more by |
|---|---|---|---|
| 1 | $18,430 | $51,703 | $33,273 |
| 3 | $56,816 | $88,563 | $31,747 |
| 5 | $97,326 | $124,037 | $26,711 |
| 7 | $140,069 | $157,959 | $17,890 |
| 10 | $208,621 | $205,518 | −$3,102 |
| 15 | $335,724 | $274,017 | −$61,707 |
Three things that table shows and a headline verdict cannot.
Year one is brutal and it is supposed to be. $33,273 is the down payment, the closing costs and the first year's cost gap, all landing at once. This is not evidence that buying is a mistake; it is the shape of the investment.
The gap closes slowly and then quickly. From year 1 to year 5 it narrows by only $6,562 — the buyer spends four years barely catching up, because early mortgage payments are almost entirely interest and the equity is not yet doing anything.
And after break-even it compounds hard. From year 10 to year 15 the buyer goes from $3,102 ahead to $61,707 ahead. The reward for holding is real and it is entirely on the far side of a long wait.
4. Appreciation decides almost everything
This is the finding that matters more than every other number on this page.
Change nothing but the appreciation rate:
| Annual appreciation | Break-even year |
|---|---|
| 0% | Year 24 |
| 1% | Year 20 |
| 2% | Year 15 |
| 3% | Year 10 |
| 4% | Year 7 |
| 5% | Year 5 |
One percentage point moves the break-even by three to five years.
From 0% to 5% — a range that is entirely plausible over any given decade — the answer moves from "buying takes twenty-four years" to "buying takes five."
And nobody can forecast it. Not the seller, not the agent, not this site. Past appreciation for a county is a measurement of what already happened; it is not a prediction, and the whole rent-versus-buy question turns on a number that is unknowable at the moment you have to decide.
Three practical consequences.
Run the comparison at more than one appreciation rate. If buying only wins at 5%, you are not making a housing decision, you are making a leveraged bet on your local market. That may be fine — but it should be a decision you know you are taking.
Treat a low or zero assumption as the stress test, not the pessimistic case. Plenty of American counties have had a flat or negative decade, and the state articles in this series flag several where that is the honest input.
And note that appreciation cuts both ways on a leveraged asset. With 10% down, a 10% fall in the home's value wipes out the entire down payment and more, once selling costs are counted. The leverage that makes 5% appreciation so powerful is the same leverage that makes a fall so severe.
5. Selling costs are the most underweighted number
7% of the sale price. On a house that has appreciated to $457,000 by year ten, that is about $32,000 — and it never comes back.
What it does to the break-even:
| Cost to sell | Break-even year |
|---|---|
| 4% | Year 8 |
| 6% | Year 10 |
| 7% | Year 10 |
| 8% | Year 11 |
| 10% | Year 12 |
A four-year swing across a range of selling costs that real transactions actually span.
Why 7% rather than the 5% or 6% people quote: agent commission is the largest part but not the only part. Transfer tax, title, attorney fees where required, and the concessions a seller frequently ends up making all land on the same side of the ledger, and they vary enormously by state. This site's closing-cost articles carry the state-level detail.
The argument that you never pay it if you never sell is real and it has limits.
It is genuinely true that a buyer who holds for thirty years and dies in the house never realises the selling cost. For that buyer the break-even in this table is pessimistic.
But most people sell. Jobs move, families change size, relationships start and end. A comparison that assumes you never sell is assuming away the most common outcome, and the honest version prices the exit even for someone who currently intends to stay.
The reasonable middle: run it both ways. If buying wins only when the selling cost is excluded, that is worth knowing before you commit.
6. The two assumptions people argue about
Both are legitimate disagreements and both move the answer.
What the renter's money earns
| Return on the un-spent down payment | Break-even year |
|---|---|
| 0% | Year 8 |
| 3% | Year 9 |
| 5% | Year 10 |
| 7% | Year 12 |
Assuming the renter earns nothing on $34,000 is assuming they put it under a mattress, which flatters buying by two years. Assuming 7% flatters renting.
The honest objection to a high figure: most renters do not actually invest the difference. That is true and it is a behavioural fact, not a financial one — and it argues for automating the investment, not for pretending the money does not exist. Pay yourself first is the mechanism.
How fast rent rises
| Annual rent increase | Break-even year |
|---|---|
| 0% | Year 18 |
| 2% | Year 12 |
| 3% | Year 10 |
| 5% | Year 8 |
This is the strongest argument for buying and it is usually made badly.
The case is not that rent is "throwing money away." It is that rent is an unhedged, indefinitely rising cost, and a fixed-rate mortgage payment is not. At 5% annual increases the $1,700 rent is $2,637 by year ten; the principal and interest is still $1,934.
The limits of that argument, stated fairly: the mortgage payment is fixed but the ownership cost is not. Property tax rises with assessments, insurance has risen sharply in many states, and maintenance rises with everything else. Only the P&I is frozen — and it is 73% of the first-year cost, not all of it.
7. What the comparison cannot tell you
Four things the arithmetic genuinely does not capture, in both directions.
How long you will actually stay. This is the input that decides the answer and it is a guess. The break-even year is only useful compared against it, and people systematically overestimate their own stability — jobs, relationships and family size all change faster than a ten-year horizon.
The value of not being able to be told to leave. A fixed-rate owner cannot be given notice, cannot be renewed at a higher rent, and cannot be sold out from under. That is worth something real and this site will not put a number on it.
The value of being able to leave. The other side of the same coin. A renter can take a job in another state with sixty days' notice and no transaction costs. For anyone whose career benefits from mobility, that optionality can be worth more than the entire break-even gap.
And the maintenance you will actually do. The 1% assumption is a convention. An older house costs more; a new-build costs less at first and then does not. A buyer who defers maintenance appears to win the comparison and is borrowing against the house's condition.
8. The three cases where the answer is already decided
Most of this article is about the ambiguous middle. Three situations are not ambiguous, and recognising yours saves running anything.
You are near-certain to move within five years. Buying loses in every scenario on this page at five years — by $26,711 in the base case, and by more at lower appreciation. A short horizon is the one input that settles the question on its own, and it settles it against buying regardless of how attractive the market looks.
You expect to stay twenty years or more and can comfortably carry the payment. Buying wins at 3% appreciation by $61,707 at year fifteen alone, and the gap keeps widening. At that horizon even the 0% appreciation case breaks even, at year twenty-four. The remaining question is affordability, not arithmetic.
The monthly gap does not fit in your budget. $951 a month more than the rent is not a rounding difference — it is a fifth of a $60,000 earner's take-home. A purchase that only works if nothing goes wrong is a purchase that has removed your margin for anything going wrong, and no break-even year compensates for that.
Everything between those three cases is where the calculator earns its keep, and where section 4's warning applies hardest: if the answer flips between a 1% and a 4% appreciation assumption, the arithmetic has not given you an answer. It has told you the decision rests on something unknowable, and that is itself a useful finding.
9. How to use this properly
Five steps, and the output is not a verdict.
Get your own four numbers. Home price, rate, property tax and insurance for your actual state — not national averages, because property tax and insurance both vary by a factor of several across the country. This site's state pages carry both.
Run it at three appreciation rates, not one. 0%, your county's backward-looking figure, and something in between. If the answer flips across that range, you have learned the most important thing available.
Compare the break-even year to how long you will honestly stay — and then subtract two years from your own estimate, because almost everyone overestimates.
Check the first-year monthly cost against the rent, not the mortgage payment against the rent. The $951 gap in section 1 is the number your budget has to absorb, and it is what 50/30/20 will be measured against.
And then decide. If the break-even is year ten and you expect to stay five, the arithmetic has answered. If it is year six and you expect to stay fifteen, it has answered the other way. If it is close, the arithmetic is telling you it is close — and at that point the non-financial reasons in section 7 are not a tiebreaker, they are the actual decision.
10. The question underneath the question
Break-even arithmetic answers "when does buying become cheaper." It does not answer "should I buy," and the gap between those two is where most of the real decision sits.
Three things the break-even never sees.
Whether you will still want to be there. The break-even assumes you stay. A job, a relationship or a family change that moves you before it arrives converts the whole calculation into a loss — and the shorter the horizon, the more the arithmetic depends on a forecast about your own life rather than about housing.
What the flexibility was worth. A renter can leave with a month's notice. That option has real value, it is largest exactly when your circumstances are least settled, and no break-even model prices it.
What owning costs in attention. A boiler on a Sunday is the owner's problem. That is not a line in any spreadsheet and it is a genuine ongoing cost.
None of this argues against buying. It argues that the break-even is a constraint rather than a conclusion: it tells you the minimum stay that makes the money work, and you supply the judgement about whether that stay is realistic. A number that says "seven years" is useful precisely because it is a question about your next seven years, not an answer about houses.
Frequently asked questions
How long does it take for buying to beat renting? In this representative scenario, year ten. At year five buying is still $26,711 behind and at year seven $17,890 behind. The exact year depends almost entirely on appreciation — at 0% it is year 24 and at 5% it is year 5.
Why is the break-even so much later than people expect? Mostly because the usual comparison is the mortgage payment against the rent. That omits property tax, insurance and maintenance. The all-in first-year cost of owning here is $2,651 a month against $1,700 of rent — a $951 gap, not the $234 the payment comparison suggests.
What single input matters most? Appreciation, by a wide margin. One percentage point moves the break-even by three to five years. It is also the input nobody can forecast, which is why the comparison should be run at several rates rather than one.
Should I include selling costs if I never plan to sell? Run it both ways. It is genuinely true that a buyer who never sells never pays the 7%, and it is also true that most people sell — jobs, families and relationships change. If buying only wins when the exit cost is excluded, that is worth knowing before committing.
Is renting throwing money away? No, and the better version of the argument is different: rent is an unhedged cost that rises indefinitely, and a fixed-rate mortgage payment does not. But only the principal and interest is fixed — property tax, insurance and maintenance all rise, and P&I is 73% of the first-year cost here, not all of it.
Does the renter really invest the down payment? Often not, which is a behavioural fact rather than a financial one. Assuming 0% return moves the break-even from year 10 to year 8. The honest response is to automate the investment rather than to assume the money does not exist.
What if house prices fall? With 10% down, a 10% fall wipes out the entire down payment once selling costs are counted. The leverage that makes 5% appreciation so powerful works identically in reverse, and any comparison run only at positive rates is hiding that.
What is the single most useful output? The break-even year, compared against how long you will actually stay — with two years subtracted from your own estimate, because nearly everyone overestimates their own stability.
What to do next
Run it with your own state's property tax and insurance, at three different appreciation rates. If the answer flips, that is the finding.
- Rent vs. buy calculator — your state, your numbers, your break-even year.
- Rent affordability calculator — the landlord's test and the budget test.
- The 30% rule is measured against the wrong number — what you can actually carry.
- The 50/30/20 rule and where it breaks — what the $951 gap has to come out of.
- Renting in the USA in 2026 — all fifty states.
Every figure on this site is sourced and dated. How we source every number.
All figures are computed by this site's own rent-versus-buy engine using the inputs listed in full in section 2. The scenario is representative and is not a prediction; the home price, rent, rate and cost assumptions are illustrative round numbers chosen to demonstrate the arithmetic, and the sensitivity tables vary one input at a time with everything else held constant. Appreciation rates shown are hypothetical and are not forecasts — past county appreciation is a backward-looking measurement and this site does not project it forward. Property tax and homeowners insurance vary by a factor of several across states; use your own state's figures from this site's state pages rather than the values here. This is general education and not financial advice.