How Long Until Buying Pays Off?

Your break-even year is the first year the net worth you build by owning, after closing costs and the cost of selling, passes what you would have by renting and investing the difference. Before it, renting is ahead. After it, owning pulls further ahead every single year.

The Default Scenario

On a $400,000 home with 20% down at 6%, versus $2,500 a month in rent, buying breaks even in year 3. After 10 years the renter has paid $348,620 with nothing to show for it, while the owner holds $269,772 in equity, including $52,206 of principal paid down.

What Moves Your Break-Even Point Sooner

• Seller-paid closing costs. Less cash out of pocket, same equity. Usually the single biggest lever a buyer controls.
• A payment close to rent. The smaller the monthly gap, the less the renter has left to invest.
• Faster rent growth. Your mortgage principal and interest are fixed. Rent is not.
• Home appreciation. Even a modest 3% a year compounds on the full value of the home, not just your down payment.
• A lower rate, or points that buy one. Less interest means more of each payment becomes equity.

What Pushes It Later

High closing and selling costs, flat or falling prices, heavy carrying costs such as taxes, insurance, upkeep and HOA dues, and a short stay. If you expect to move within a year or two, renting usually wins: there is not enough time to earn the transaction costs back.

The Rule of Thumb

Three to four-plus years in the home is normally enough for principal paydown, appreciation and rising rents to outweigh the cost of getting in and out. Anything shorter, and flexibility is worth more than equity. The calculator gives you your year, not the average.

Educational estimates only. Not a loan approval, pre-approval, rate lock, Loan Estimate, or an offer or commitment to lend. Equal Housing Opportunity.