Buy vs rent guide
Buy vs rent break-even, explained
The buy vs rent break-even is the moment when a homeowner's net worth, after paying the costs of selling, catches up with a renter's who invested the savings. Before that point renting is ahead; after it, owning is. Knowing roughly when it arrives is often more useful than any single end-of-horizon number.
What the break-even measures
Each year, both households are assumed to spend the same total on housing. The owner builds equity as the mortgage balance falls and the home's value changes. The renter invests whatever the owner spends beyond rent, starting with the cash the owner put into the down payment and closing costs.
The break-even is the first time the owner's net worth, with selling costs deducted, stays at or above the renter's. 'Stays' matters: a result that touches even and then slips back has not really broken even.
A year-by-year worked example
Assume a $600,000 home, 20% down, a 4.5% five-year fixed mortgage with a 25-year amortization, Alberta-style costs, 3.5% annual appreciation, rent of $2,300 a month growing 3% a year and a 5.5% investment return. These are illustrative planning inputs, not market data. The table shows each household's net worth if the owner sold at the end of that year:
| Year | Home value | Mortgage balance | Owner net worth | Renter net worth | Owner minus renter |
|---|---|---|---|---|---|
| 1 | $621,000 | $469,303 | $117,835 | $150,940 | −$33,105 |
| 2 | $642,735 | $458,120 | $149,966 | $176,418 | −$26,452 |
| 3 | $665,231 | $446,428 | $183,341 | $202,855 | −$19,514 |
| 4 | $688,514 | $434,203 | $218,008 | $230,289 | −$12,281 |
| 5 | $712,612 | $421,423 | $258,759 | $258,763 | −$4 |
| 6 | $737,553 | $408,060 | $291,425 | $288,323 | +$3,102 |
| 7 | $763,368 | $394,090 | $330,283 | $319,015 | +$11,268 |
| 8 | $790,085 | $379,484 | $370,649 | $350,886 | +$19,762 |
| 9 | $817,738 | $364,213 | $412,583 | $383,990 | +$28,593 |
| 10 | $846,359 | $348,248 | $460,065 | $418,379 | +$41,686 |
Why the answer is about 5.7 years, not 5.0
At the end of year five the two are almost exactly even: −$4. That is also when the first five-year mortgage term ends, so no early-repayment penalty applies in the model. A month later the gap reopens to about −$4,085, because selling in the middle of a term triggers an assumed three-month interest penalty. The owner then closes the gap gradually and stays ahead from month 68, which is about 5.7 years.
The detail is a good reminder that the break-even depends on when and how you exit. If your mortgage is portable or you can time a sale near the end of a term, the effective break-even can arrive earlier.
What moves the break-even earlier or later
Holding everything else at the example inputs and changing one assumption at a time, the calculator gives these sustained break-even points. 'Not within 40 years' means buying never stays ahead within the longest horizon modelled.
| Assumption | Setting | Break-even |
|---|---|---|
| Home appreciation | 5% | about 2.6 years |
| Home appreciation | 3.5% (base) | about 5.7 years |
| Home appreciation | 2% | about 38.9 years |
| Home appreciation | 0% or 1% | not within 40 years |
| Mortgage rate | 3.5% | about 3.3 years |
| Mortgage rate | 5.5% | about 15.3 years |
| Mortgage rate | 6.5% | not within 40 years |
| Starting monthly rent | $2,600 | about 3.7 years |
| Starting monthly rent | $3,000 | about 2.6 years |
| Starting monthly rent | $2,000 | not within 40 years |
| Rent growth | 5% | about 4.9 years |
| Rent growth | 0% | not within 40 years |
Break-even by horizon: the appreciation you need
A related way to look at it is to ask what annual appreciation makes buying and renting finish equal for a given stay. At three years the home would need to rise about 4.56% a year, at five years about 3.50%, at ten years about 2.91% and at fifteen years about 2.70%. The longer you stay, the less growth you need, because equity from repayment and cost advantages have time to build.
Use this as a sanity check against your own expectations, and read the guide on home-price appreciation assumptions before leaning on any single figure.
Break-even is not a prediction or a deadline
A break-even of 5.7 years does not mean you must stay that long, or that you will profit afterwards. It says that, on these assumptions, a shorter stay probably costs more than renting would have. If you plan to move in three years, the break-even tool can show you how large that shortfall might be under your own inputs.
Pair this page with the guide on time horizon and the methodology for how each cost is modelled.
Questions people ask
What is the break-even point in buy vs rent?
It is the length of stay after which a homeowner's net worth, with selling costs deducted, stays ahead of a renter's who invested the difference.
Why is the break-even often several years?
Buying carries closing costs on entry and selling costs on exit. Equity growth and mortgage repayment need time to overcome those fixed hurdles.
Can there be no break-even at all?
Yes. With weak price growth, a high mortgage rate or low rent, the renter can stay ahead for decades. The table above shows several cases where buying does not catch up within 40 years.
Does the break-even change if I sell mid-term?
It can. Selling between mortgage renewals may trigger a prepayment penalty, which pushes the break-even later. Check your lender's terms.
Official references
Educational information, not financial, tax, legal or mortgage advice. Rules and rates change; confirm current details with an official source or a qualified professional.