1. What is Break Even Analysis?

Break Even analysis determines the point at which the cost of buying equals the cost of renting. This New York Times tool helps compare the long-term financial implications of buying versus renting a home.

2. How Does the Calculator Work?

The calculator uses the break even formula:

Where:

• Total Buy Cost — All costs associated with purchasing
• Total Rent Cost — All costs associated with renting
• Annual Rent Cost — Yearly recurring rent expenses
• Annual Buy Cost — Yearly recurring homeownership expenses

Explanation: The equation calculates how many years it takes for the cumulative costs of buying to equal the cumulative costs of renting.

3. Importance of Break Even Calculation

Details: Understanding the break even point helps in making informed decisions about whether to rent or buy based on your expected duration in a property and local market conditions.

4. Using the Calculator

Tips: Enter all costs in dollars. Be sure to include all relevant costs (down payment, closing costs, maintenance, etc. for buying; security deposits, rent increases, etc. for renting).

5. Frequently Asked Questions (FAQ)

Q1: What costs should be included in Total Buy Cost?
A: Include down payment, closing costs, moving expenses, and any immediate renovations or repairs.

Q2: What costs should be included in Annual Buy Cost?
A: Include mortgage payments (principal + interest), property taxes, insurance, maintenance, and HOA fees.

Q3: What if my break even point is negative?
A: A negative result suggests buying is immediately cheaper than renting in your scenario.

Q4: How does appreciation affect the calculation?
A: This basic model doesn't account for home appreciation or investment returns on savings from renting.

Q5: Should I always buy if the break even point is short?
A: Not necessarily - consider your personal circumstances, job stability, and lifestyle preferences.