Compare the average annual cost of buying a home versus renting a similar one for each stay length from 1 to 30 years. The headline is the shortest stay where buying becomes cheaper, after mortgage payments, taxes, insurance, maintenance, rent increases, tax savings, and the return you could have earned on the down payment.
Default example
| Stay | Buy (annual) | Rent (annual) |
|---|---|---|
| 1 year | $79,323 | $36,396 |
| 5 years | $47,095 | $41,464 |
| 9 years | $47,338 | $47,336 |
| 10 years | $47,979 | $48,932 |
| 30 years | $76,144 | $95,117 |
On the defaults ($500,000 home, 20% down, 6.782% rate, $3,000 rent), buying is cheaper if you stay 9.0 years or longer under these assumptions.
Examples
Default inputs, 9.0-year break-even
A $500,000 home with 20% down, a 30-year loan at 6.782%, 2% buyer's closing costs, 1.5% property tax, $2,500 insurance, 1.5% maintenance, and 3% appreciation, versus $3,000 monthly rent that rises 3% a year. Average buying cost remains just above renting in year 9 ($47,338 vs $47,336) and falls below renting in year 10 ($47,979 vs $48,932), so the interpolated stay is 9.0 years.
Lower rent, longer wait to buy
If a similar home rents for much less, the crossover moves out — or renting stays cheaper for the full 30 years. That is common when local rents are low relative to prices, or when you would earn a high return on the cash not used as a down payment.
Formula
Each stay length n (1–30 years) is a buy-and-sell scenario. Cash outflows are grown at the after-tax investment return r, then divided by n.
r = investmentReturn × (1 − federalTax − stateTax)
Buying. Year y home value is price × (1 + appreciation)^y. Property
tax starts at price × tax% in year 1 and grows from year 2. Insurance and HOA
follow the same year-1 convention and then grow at the cost-increase rate.
Maintenance is maintenance% × current value. Mortgage principal and interest
use a standard amortizing payment. Itemized tax savings are
max(0, mortgageInterest + propertyTax − standardDeduction) × (federal + state)
At the end of year n you sell: proceeds are value × (1 − sellingClosing%)
minus the remaining loan balance. Gain above the modeled filing-status exclusion
($500,000 for married filing jointly or a qualifying surviving-spouse scenario;
$250,000 otherwise) is taxed at the fixed 15% scenario rate.
Renting. Year y rent and renter's insurance are the current monthly
amounts × 12 × (1 + rentalIncrease)^(y−1). The security deposit is returned at
the end of the stay (only missed investment return is a cost). Upfront fees are
not returned.
The crossover stay is interpolated to one decimal between the last year renting is cheaper and the first year buying is cheaper.
The longer you plan to stay, the more buying's one-time costs are spread out. If your stay is shorter than the result, renting is the cheaper path on these assumptions.
Sources and limitations
- IRS Publication 936 for mortgage-interest deduction rules
- IRS Publication 523 for home-sale gain exclusions
- IRS 2026 inflation adjustments for standard deductions
The model assumes smooth annual growth, a constant mortgage rate, sale at each year-end, and a fixed marginal tax-rate shortcut. It does not model PMI, moving costs, renovations, special assessments, transaction timing, or investment volatility. The crossover is a scenario result, not a forecast.