October 12, 2026 · 9 minute read
By Nethaven Team · Personal finance research & product team
Rent vs buy: how long do you need to stay to break even?
With 30-year mortgage rates at 7.40% in October 2026, buying needs time to beat renting. See a worked break-even year and the inputs that move it most.
Buying a home usually beats renting only if you stay long enough to recover the cost of buying and selling. In a worked example with a 400,000 dollar home, a 7% mortgage, and 2,500 dollars of rent, buying pulls ahead in year 9. A lower mortgage rate or faster price growth shortens that. Higher rates lengthen it.
The 30-year fixed mortgage rate averaged 7.40% on October 8, 2026, up from 6.30% a year earlier, according to Freddie Mac's Primary Mortgage Market Survey. At that rate, the monthly cost of owning a home is often well above the rent on a similar one. That does not settle the question on its own, because part of every mortgage payment comes back to you as equity.
What settles it is time. This guide explains the break-even year, shows a full worked example, and ranks the inputs that move the answer. The example figures come from our rent vs buy calculator and are illustrations, not forecasts.
What is the rent vs buy break-even year?
It is the first year in which a buyer who sold up would walk away with more money than a renter who invested instead. Before that year, renting leaves you richer. After it, buying does.
The comparison only works if both people are treated the same way:
- Same starting cash. The buyer spends the down payment and buying costs on the home. The renter invests that same amount.
- Same monthly spending. Whoever has the lower housing bill invests the difference.
- Same finish line. The buyer's result counts the sale price after selling costs and after clearing the loan. The renter's result is the invested balance.
Why does buying lose in the early years?
Because a buyer pays to get in and pays again to get out. Closing costs on a purchase run between 2% and 6% of the price, according to Fannie Mae. Selling adds agent fees and more closing costs. Our example assumes 3% to buy and 6% to sell, so the buyer starts roughly 9% of the home's price behind.
Early mortgage payments also build little equity. On a 320,000 dollar loan at 7% over 30 years, the payment is 2,128.97 dollars a month. In the first year, about 271 dollars of that goes to the loan balance on average. That is 13% of the payment. The rest is interest.
So for the first few years a buyer is paying large fees, mostly interest, and all the upkeep, while the renter's invested down payment grows untouched.
How do you calculate your break-even year?
Run both paths year by year and find where the lines cross. Here is the example the calculator opens with: a 400,000 dollar home, 20% down, a 7% fixed mortgage over 30 years, and 2,500 dollars of rent for a similar home. Home prices and rent rise 3% a year. Investments return 6%. Property tax is 1.1% and maintenance 1% of the home's value, with 2,400 dollars a year for insurance.
| Leave after | If you bought | If you rented | Who is ahead |
|---|---|---|---|
| 1 year | $70,531 | $104,040 | Renting by $33,510 |
| 3 years | $101,339 | $128,503 | Renting by $27,164 |
| 5 years | $134,666 | $153,404 | Renting by $18,738 |
| 7 years | $170,761 | $178,640 | Renting by $7,879 |
| 9 years | $209,903 | $204,085 | Buying by $5,818 |
| 10 years | $230,713 | $216,839 | Buying by $13,873 |
| 15 years | $359,108 | $290,180 | Buying by $68,928 |
Both people started with 92,000 dollars: an 80,000 dollar down payment plus 12,000 in buying costs. In year one, owning costs about 3,029 dollars a month against 2,500 for renting. The renter invests the 529 dollar difference.
Two things close the gap. Rent rises every year while the mortgage payment stays fixed, so by year 9 the rent is 3,167 dollars and owning costs 3,269. And the home's value grows on the full 400,000, not only on the 80,000 the buyer put in. The break-even year here is 9.
What moves the break-even year the most?
The mortgage rate and the gap between home price growth and investment returns. The table changes one input at a time from the example above.
| Change | Break-even year | Result after 7 years |
|---|---|---|
| Example as given | Year 9 | Renting by $7,879 |
| Mortgage rate 6% instead of 7% | Year 6 | Buying by $18,716 |
| Home prices grow 4% instead of 3% | Year 5 | Buying by $21,597 |
| Home prices grow 2% instead of 3% | Year 15 | Renting by $35,615 |
| Rent rises 4% instead of 3% | Year 7 | Buying by $124 |
| Investments return 5% instead of 6% | Year 7 | Buying by $2,576 |
One percentage point of home price growth moves the break-even from year 5 to year 15. Nobody can forecast that number to within a point, which is the main reason to run a cautious case and an optimistic one instead of trusting a single result.
The starting rent matters just as much. Keep everything else the same and change only the rent on the comparable home:
- Rent of 2,300 dollars: break-even in year 15
- Rent of 2,400 dollars: year 11
- Rent of 2,500 dollars: year 9
- Rent of 2,600 dollars: year 7
- Rent of 2,700 dollars: year 6
That is why the rent you enter has to be for a home like the one you would buy. Comparing a house purchase with the rent on a smaller flat makes renting look better than it is. The price-to-rent ratio is a quick way to check how your local market leans before running the full numbers.
How long do people actually stay in a home?
Longer than they used to. Sellers had owned their home for a median of 11 years, a record high, in the National Association of Realtors' 2025 Profile of Home Buyers and Sellers, which covers sales from July 2024 through June 2025. Buyers in the same survey expected to stay a median of 15 years.
Those are medians across all buyers. Your own horizon is what counts. A new job in another city, a growing family, or a relationship change can end a stay early, and an early exit is exactly where buying costs the most. If you are honestly unsure whether you will stay past the break-even year, that uncertainty is an argument for renting.
What does the calculation leave out?
The model is deliberately simple, so know its limits:
- Taxes beyond property tax. Income tax relief on mortgage interest, capital gains tax on the home, and tax on investment gains all vary by country and household.
- A renter who spends the difference. The renting result assumes every dollar saved is invested, every month. If it is spent instead, buying wins much sooner, because a mortgage forces saving.
- Uneven markets. Prices, rents, and investments do not grow at a steady rate. A sale in a weak year can undo the math.
- Everything that is not money. Stability, schools, the freedom to renovate, and the freedom to leave all have value the model cannot price.
Common mistakes to avoid
- Comparing rent with the mortgage payment alone, and ignoring property tax, maintenance, and insurance.
- Forgetting the cost of selling. It is usually the largest single fee in the whole comparison.
- Counting the down payment as free. Invested, it would have earned a return.
- Using one optimistic price growth figure. Test a lower one before you commit.
For a faster screen before the full calculation, the 5% rule compares a year of rent with the price in one line. When you are ready for your own numbers, open the rent vs buy calculator, set how long you plan to stay, and read the year buying pulls ahead. If you do buy, track the home and the mortgage in Nethaven alongside your other accounts, so you can see your equity as part of your net worth instead of guessing at it.
Track this in Nethaven
Keep accounts, budgets, debt, goals, and subscriptions connected between reviews on iOS, Android, and web.
Frequently asked questions
How many years should you stay in a house to make buying worth it?
There is no fixed number, because it depends on the mortgage rate, the price compared with local rents, and how fast prices rise. In our worked example with a 7% mortgage it takes 9 years. At a 6% mortgage rate the same home breaks even in year 6. Run your own figures instead of relying on a rule such as five years.
What is a rent vs buy break-even point?
It is the first year in which selling the home, paying selling costs, and clearing the mortgage would leave you with more money than renting a similar home and investing the difference. Before that point renting leaves you richer, and after it buying does.
Is it cheaper to rent or buy in 2026?
On monthly cost alone, renting is often cheaper while 30-year mortgage rates are above 7%. Freddie Mac reported an average of 7.40% on October 8, 2026. Monthly cost is only part of the answer though. A buyer builds equity and a renter can invest the savings, so the result depends on how long you stay and on your local prices and rents.
Why is the first year of owning so expensive?
You pay buying costs up front, and you would pay selling costs if you left. In our example those add up to about 9% of the home's price. On top of that, only about 13% of each first-year mortgage payment reduces the loan at a 7% rate. The rest is interest.
Does a bigger down payment change the break-even year?
It lowers the monthly payment and the interest you pay, but it also means more cash that could have been invested. When your mortgage rate is higher than the return you expect on investments, a bigger down payment tends to help buying. When it is lower, the effect is small or goes the other way.
What if I do not invest the money I save by renting?
Then the renting result in any rent vs buy comparison overstates what you would really have. The math assumes the down payment and every monthly saving are invested and left alone. If that is unlikely for you, buying acts as forced saving and deserves more weight than the numbers alone suggest.
Is this financial advice?
No. The figures are illustrative outputs from a simple model with steady growth rates and a fixed mortgage rate. They do not account for your taxes, your job security, or your local market. Use them to understand the trade-off, then check the details for your own situation.