Buying is a bet that you will stay long enough to clear the transaction costs.
By David Liu, founder of DIY9lives. Last updated November 2, 2026.
The rent-or-buy question is usually argued with monthly payments, and the monthly payment is the least informative number in it. What decides the answer is how long you stay, because buying carries costs at both ends that never come back. This guide sets out those costs and works a break-even year for a $300,000 house, the same comparison the rent vs buy calculator runs.
Some money you spend builds equity and some does not. A mortgage payment has both inside it: the principal portion reduces what you owe, and the interest portion is gone. Property tax, insurance, maintenance and mortgage insurance are gone. Rent is entirely gone, which is the honest case against buying — and it is also the only cost of renting.
The comparison is therefore not "rent versus mortgage". It is "rent versus the part of ownership that disappears", with the principal paydown counted as forced savings.
Closing costs cover lender fees, title insurance, appraisal, recording and prepaid tax and insurance. They run a few percent of the price, and none of it is recoverable. There is also the inspection, which is small and worth every dollar.
The larger set. Agent commission, transfer taxes, title work and concessions to a buyer commonly add up to something in the region of 6% to 8% of the sale price. On a $300,000 house, that is $18,000 to $24,000 that comes out of the proceeds.
Property tax, insurance, maintenance and any HOA dues. Maintenance is the one owners underestimate: a house consumes money in irregular lumps — a water heater, a roof, a furnace — and the annual average is usually estimated at around 1% of value, though an older house can be far more.
A $300,000 house, 10% down, 6.75% over 30 years, bought from a rental at $1,800 a month.
| Monthly ownership cost | Amount |
|---|---|
| Principal and interest on a $270,000 loan | $1,751 |
| Property tax at 1.2% a year | $300 |
| Insurance | $120 |
| Maintenance at 1% a year | $250 |
| Total | $2,421 |
Against $1,800 of rent that is a premium of $621 a month, or about $7,450 a year. But part of that premium is not a cost: in year one, roughly $2,790 of the $21,012 paid in principal and interest goes to principal. Subtract it and the true annual cost of owning over renting is closer to $4,660.
Now the transaction costs. Closing at 3% is $9,000; selling at 7% is $21,000. That is $30,000 of money that does not come back. At a little under $5,000 a year of ownership premium, $30,000 takes about six years to work off. In this example the break-even is somewhere around five to seven years.
That range is the honest answer rather than a single year. The premium shrinks each year as the loan amortises and more of the payment goes to principal, which pulls the break-even earlier. Maintenance rises as the house ages, which pulls it later. Rent rises too, and a rent increase of 3% a year closes the gap faster than most people expect.
If the house is worth more when you sell, the gain offsets the transaction costs. If it is worth less, the break-even can move out by years or vanish entirely. This is the part nobody can forecast, and it is the reason buying with a short horizon is a gamble rather than a plan.
More down means less borrowed, less interest, and usually no mortgage insurance. It also means more capital tied up in one asset. The mortgage insurance threshold is worth knowing: below 20% down, conventional loans typically carry it until the balance falls far enough.
Everything else being equal, the break-even year is the number to compare against your realistic horizon. A job that may move you in three years argues for renting. A house you expect to keep for fifteen makes the transaction costs a rounding error.
Renting is not just a lower payment; it is a payment that releases capital. If renting costs $621 a month less, that difference can be invested. Over ten years at a modest return, the invested difference is a real sum, and it is the strongest argument for renting in an expensive market.
Conversely, owning forces a payment that builds equity whether or not you are disciplined about saving. For people who would not invest the difference, the forced saving is worth more than it looks on a spreadsheet.
Both of those are about behaviour as much as arithmetic. Run the numbers with your honest horizon and your honest saving habits, then choose the version you would still be comfortable with if the house lost 10% of its value in year two.
The comparison usually includes the mortgage, the tax and the rent, and stops there. Five other lines move the break-even year.
None of these decides the question on its own. Together they push the break-even out by a year or two in most cases, which is exactly the margin where a three-year horizon stops making sense and a ten-year horizon still does.
The loan is a variable the comparison usually fixes. The rate you actually get depends on credit, down payment and the day you lock, and half a point changes the monthly payment by enough to move the break-even by a year. A 15-year loan pays off faster and costs less interest, but the higher payment leaves less room to invest the difference.
Deliberate overpayment shortens the break-even in a way this comparison does not model. Extra principal reduces both the balance and the future interest, so the unrecoverable part of the payment shrinks faster and more of each month becomes equity. On a $270,000 loan at 6.75%, an extra $200 a month takes roughly seven years off a 30-year term, and the interest saved is substantial.
That is the real argument for buying over a long horizon: the payment is fixed while rent is not, and the principal portion eventually dominates the interest. The break-even year is where that process starts to win.
Last updated: November 2, 2026. Estimates only. Not tax, legal, financial, or professional advice. See the terms.