Finding your break-even point

Last reviewed October 30, 2026

Buying has big up-front and exit costs. Renting doesn't. So buying usually starts out behind and catches up over time, through principal paydown, protection from rent increases and any appreciation. The break-even point is how long you need to stay for buying to come out ahead.

The method, in five steps

1. Costs to buy: land transfer tax (after any refund), legal fees, inspection, tax on mortgage insurance, moving.
2. Costs to sell later: commission, legal fees, possibly a mortgage penalty.
3. The yearly gap: each year, compare rent with the unrecoverable costs of owning (interest, property tax, insurance, maintenance, condo fees). See the cost of owning.
4. The renter's investment return: what the down payment and closing costs would earn if invested instead.
5. The owner's gains: any appreciation in the home's value.

Add it up year by year. The year the owner's cumulative position overtakes the renter's is your break-even.

A worked example (hypothetical)

These numbers are made up to show the method, not to describe the London market today. Replace them with real figures.

In year one, owning costs about $200 a month more in unrecoverable costs, and the buyer has also spent $8,000 to buy and would face selling costs to get out. So buying is well behind at first.

But each year, rent rises while the owner's biggest cost, mortgage interest, slowly falls as the principal is paid down. The home also gains value. We ran these assumptions month by month. Method: the renter invests the $45,000 down payment plus the $8,000 buying costs at 4%, and also invests each month the amount by which the owner's full outlay (mortgage payment plus the $1,000 of tax, insurance and maintenance) exceeds rent. The owner's position is the home's value less 5% selling costs, minus the mortgage balance. On that basis the owner is about $26,000 behind after year one, about $5,500 behind after year five, and pulls ahead around month 70, so roughly year six. It is a narrow crossover: small changes, such as appreciation credited only once a year, can push it into year seven. After that the owner pulls further ahead each year (about $9,000 ahead by year seven). The example ignores mortgage insurance and assumes a constant rate for simplicity. Change the assumptions, for example slower appreciation or a higher interest rate, and the break-even moves out. A lower rate or faster rent growth pulls it in.

What moves the break-even most

• How long you stay. It's the biggest factor of all. Transaction costs are spread over more years.
• The rent-to-price relationship. When rent is high relative to prices, buying wins sooner. London is often closer than Toronto on this measure.
• Interest rates. Higher rates mean more unrecoverable interest.
• Appreciation. Faster growth favours buying. Flat or falling prices favour renting in the short term.
• Maintenance. An older house with big repairs ahead changes the math.
• The renter's discipline. Renting only wins if the renter actually invests the difference.

A simple rule of thumb

If you're confident you'll stay five years or more, buying is often competitive or better. If you might move within two or three years, renting often makes more sense. In between, run the numbers carefully.

Don't forget the non-financial side

Stability, control over your space, and the freedom to renovate or keep pets matter to owners. Flexibility, simplicity and freedom from repairs matter to renters. The break-even tells you about money. Only you can weigh the rest. See stability: renting vs owning.

What if prices fall after I buy?

Short-term price drops matter most if you have to sell soon after buying. If you stay through the dip, you keep paying down principal, and you aren't exposed to rent increases in the meantime. That's why the length of time you'll stay matters more than trying to time the market. If a drop would force you to sell, for example because the payments are a stretch, that's a sign to buy something less expensive or to wait.