Rent vs Buy: Why the Break-Even Year Can Change

There is no universal number of years after which buying beats renting. Whether and when it does depends on what you assume. With the example inputs below, renting leaves more wealth if you leave after three or five years, and buying is ahead if you stay ten. Buying first draws ahead in month 100, which is eight years and four months, and at that moment the lead is only $27. Change one assumption, such as the selling cost, the maintenance budget or home price growth, and the first month buying is ahead moves anywhere from month 39 to month 351, or never arrives within 30 years. This article shows why, using one fully stated input sheet. Every figure is hypothetical, pretax and not a forecast.

There is no universal break-even year

Rent-versus-buy break-even is the first month at which the wealth you would have after buying is at least as large as the wealth you would have after renting, if you left in that month. It is a comparison between two paths with the same resources, not a statement about whether a house is a good purchase or whether you can afford one.

The popular "five-year rule" is a rule of thumb, and the example shows how a fixed number of years can mislead. Buying comes with large transaction costs at both ends, and equity grows slowly at first, so a short stay tends to favour renting. How short depends on the price-to-rent ratio, borrowing costs, selling costs, maintenance, how fast rent and prices grow, and what the money you did not spend on a house could earn instead.

Compare ending wealth with equal starting resources

A fair comparison gives both sides the same starting money and the same monthly housing budget. The QuantStock rent versus buy calculator does this:

• Equal starting assets. Both sides begin with the larger of the buyer's upfront cash and the renter's upfront cash. The buyer converts that cash into the down payment and buying costs. The renter keeps the rest invested.
• A common monthly budget. Each month both sides have the larger of the buyer's cost and the renter's cost. Each pays its own housing cost and invests the rest, after that account has grown by the monthly return.
• Buyer wealth = invested account + home value × (1 − selling cost percentage) − remaining loan balance.
• Renter wealth = invested account + the refundable deposit, returned once at its nominal amount.

The down payment funds home equity. Each mortgage payment is a cash outflow, while its principal component reduces debt and increases net equity. Count each cash movement and asset balance once. This is a pretax model: an optional net tax benefit of owning exists, but you enter it yourself and the default is zero.

Freddie Mac's own rent-versus-buy page describes its tool as providing guidance and financial estimates and points readers to their lender for precise calculations. Treat any such tool, including this one, as a way to test assumptions rather than predict results.

A one-year example that isolates transaction costs

Start with a deliberately artificial case so every number can be checked by hand. Buy a $120,000 home with cash. Rent is $1,000 a month with a refundable $1,000 deposit. The horizon is one year, and prices, returns, growth and carrying costs are all zero.

Buying leads by $12,000, exactly a year of rent. Now add $5,000 of buying costs and 5% selling costs ($6,000 on a $120,000 sale). Both sides now start with $125,000, because the larger upfront amount sets the starting assets:

The lead shrinks to $1,000. Month by month the path is simple: buying is $10,000 behind after month one, level in month 11 and $1,000 ahead after month 12. Break-even in this toy world is roughly the transaction costs ($11,000) divided by the monthly rent saved ($1,000). Stretch the same case to two years and the lead is $13,000, and to five years $49,000. It is a teaching case, not a realistic forecast, but it shows why comparing monthly outlays alone is incomplete.

What changes at three, five and ten years?

Now a realistic sheet. These are the calculator's default inputs, and everything is stated so you can reproduce it:

The mortgage payment is $2,398.20 a month. Month-one owning cost is $3,856.54 (loan payment plus tax, insurance and maintenance) against $3,015.00 for rent plus renter insurance. The buyer needs $110,000 up front and the renter $3,100, so both start with $110,000.

Figures are rounded to whole dollars from full-precision values, so a column may differ from the sum of the rounded lines by a dollar. The buyer's invested account is zero in each column because in this sheet the owner's monthly cost is the higher one through year 15, so the renter is the one investing the monthly difference.

Buying stays behind at three and five years, mainly because buying costs and selling costs together are about $50,000 by year five, and the equity built by then is small. By year ten, appreciation and loan paydown have overtaken them. The first month buying is ahead is month 100, and it stays ahead to year 30, where the gap is $518,053. The lead is fragile at the crossing: it is −$677 in month 99, +$27 in month 100 and +$733 in month 101. A "break-even year" built on a difference that small can flip with a rounding assumption.

To test your own stay lengths, compare your own stay lengths in the calculator. Its default horizon is 30 years, so change the time horizon to 3, 5 or 10 to see the exit-year results.

Change one assumption at a time

The table changes one input from the sheet above and leaves everything else alone. "Not within 30 years" means no month in the 30-year horizon had buying ahead.

These are the changes listed in the first column, not the calculator's Sensitivity tab, which moves appreciation, rent growth and the investment return by one percentage point and reports the end-of-horizon result. Home appreciation, the investment return and rent growth produce the widest swings here. The selling-cost range is not arbitrary. Freddie Mac says a seller's real estate commission typically runs 3% to 8% of the sale price, with fees and taxes of about 2% to 4% more that vary by state, so 7% in total is one plausible input and not a standard. Rent level matters as well. At $3,500 a month buying is ahead from month 50, and at $2,500 it is not ahead in any month of the 30 years.

A higher return on savings helps the renter, whose money stays invested, and lowers the buyer's relative position. A lower return does the opposite. That is why investment return is an opportunity cost, not a forecast: it is the other use of the same money.

When the model has no crossover or more than one

"Buying never wins" is the wrong conclusion when a model finds no crossover. What it shows is that, under those assumptions and within that horizon, no month had buying ahead. With $2,500 rent, renting is ahead by about $63,262 after 30 years. With 1% rent growth, it is ahead by about $232,353.

A model can also cross more than once if assumptions push the lead back and forth. The calculator reports every crossing and whether the lead is kept, rather than declaring one permanent break-even year. In every variation run for this article the lead changed at most once, but that is a property of these inputs, not of housing markets.

A break-even is also tied to an exit date. The three-, five- and ten-year results answer "what if I left then", with that year's selling costs and balance, not "what if I stayed". If your plans are uncertain, look at the whole year-by-year table rather than a single date.

Financial results, flexibility and affordability

This comparison is about wealth under assumptions. It does not tell you what you can afford, how stable your income is, how likely you are to move, or how you value flexibility and control over your home. It leaves out moving costs, rent control, a forced sale and the stress of an unexpected repair.

Ownership brings recurring costs beyond the loan. Freddie Mac lists mortgage insurance, property taxes, homeowners insurance and association fees among the ongoing costs, and says taxes and premiums change over time. Buying also has its own step-by-step process, and the CFPB offers a guide to budgeting, loan choices and closing.

Use the right tool for each question:

• Is the purchase affordable? Check the house affordability calculator and, for renting, the rent affordability calculator first.
• What does the loan payment include? Inspect it in the mortgage calculator.
• Is it better to prepay an existing mortgage or invest? That is a different decision, covered by the mortgage versus investing guide, which assumes you already own the home.

Rent-versus-buy questions

Is buying always cheaper after five years?

No. In the example sheet renting is ahead after five years by about $23,453, and buying is ahead after ten by about $15,071. The answer depends on price and rent, transaction costs, maintenance, growth rates and what savings could earn.

Is all rent money wasted?

No. Rent pays for housing, flexibility and a lack of repair risk, just as owning costs include interest, taxes, insurance and upkeep alongside equity. Compare the complete financial picture, not a slogan.

Should I count the down payment as lost cash?

No, and not as free either. It funds equity, so it is not an expense, but it carries an opportunity cost and transaction risk because that money could have been invested and a sale has costs. Count each piece of the ledger once.

What if the model never crosses?

Then, under those assumptions and within the horizon, buying was never ahead. That is not the same as saying buying never wins. Change the horizon or an assumption and the answer can change.

Is this the mortgage-versus-investing decision?

No. That tool compares paying down an existing mortgage faster with investing the money, for someone who already owns. Rent versus buy compares two ways of housing yourself from the start.

Sources

• Freddie Mac, Rent vs. Buy Calculator: the page describes its tool as guidance and estimates; its embedded model was not audited here. Accessed 27 October 2026.
• Freddie Mac, Understanding the costs of selling your home: seller closing costs, commissions, fees and taxes. Accessed 27 October 2026.
• Freddie Mac, Homeownership costs: PMI, taxes, insurance and HOAs: ongoing costs beyond principal and interest. Accessed 27 October 2026.
• Consumer Financial Protection Bureau, Buying a house: Tools and resources for homebuyers: step-by-step budgeting, loan choice and closing resources; page last modified 16 June 2026. Accessed 27 October 2026.