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Rent vs Buy Calculator

Calculators · Added

Comparing a mortgage payment with a rent payment settles nothing, because part of the mortgage comes back to you and none of the rent does — while the buyer also pays tax, maintenance, insurance and, eventually, an agent. This runs both sides month by month as a balance sheet, has the renter invest the deposit and the monthly difference, and tells you the year at which buying pulls ahead.

years

How long you would realistically stay. This is the input that decides the answer.

Buying

%
%
years
%

Stamp duty or transfer tax, legal fees, survey, registration.

%

Agent and legal fees when you sell.

%
%

1% of the home's value is the usual rule of thumb, and it arrives in lumps.

Society maintenance, HOA dues, ground rent.

%

Nominal, not inflation-adjusted. Negative is allowed.

Renting

For a comparable place, not a cheaper one.

%
%

What the renter earns on the deposit and the monthly difference, after tax.

How to use the rent vs buy calculator

  1. 1Enter the home price, the deposit and the mortgage terms, then the running costs — property tax, maintenance, insurance and any service charge.
  2. 2Enter the rent for a comparable place, not a cheaper one, and how fast you expect it to rise.
  3. 3Set the return the renter earns on the money they did not put into a deposit. This is the assumption that decides most comparisons.
  4. 4Set how long you would realistically stay, and read the break-even year and the year-by-year table.

Examples

The transaction costs decide short stays

Input
7% to buy and 2% to sell, on a ten-year comparison
Result
Nine percent of the price has to be earned back before buying is even level

On a five-year horizon that is usually the whole answer, whatever the monthly figures say.

The assumption that swings it

Input
Investment return 10% against home growth 5%
Result
Renting and investing wins over most horizons

Reverse those two and buying wins comfortably. Neither is knowable in advance, which is the honest conclusion.

Where the payments go

Input
8.5% over 20 years, ten years in
Result
Interest paid to date is shown separately from principal, and early on it is most of the payment

It is the reason equity builds so slowly in the first years and so fast in the last.

About the rent vs buy calculator

What the monthly comparison leaves out

"The mortgage is less than the rent" is the comparison almost everyone makes, and it omits most of the costs on one side and all of the benefits on the other. Missing from the mortgage figure: property tax, buildings insurance, maintenance, any service charge, and the agent and legal fees that arrive on the day you sell. Missing from the comparison entirely: the fact that part of every mortgage payment is a transfer from your bank account into your own equity, while every rent payment is gone.

Netting those out properly means dropping the payment comparison altogether and asking a different question: after N years, which path leaves you with more? That is a net worth comparison, and it has a clean answer for any given set of assumptions. The buyer ends with a house they could sell, minus what they still owe and what selling costs. The renter ends with a portfolio.

The two levers nobody can set honestly

Home price growth and investment return are the inputs that decide most comparisons, and neither is knowable. Long-run real house price growth in most developed markets has been low — a percent or two above inflation, with decades-long periods of nothing — while equity markets have historically returned more, with far more volatility and no roof over your head in the meantime.

Because the two compound over the whole period, small differences between them swing the result enormously. A comparison where the investment return is three points above the appreciation rate will usually favour renting; reverse it and buying wins. This is why any rent-versus-buy article that reaches a confident general conclusion should be treated with suspicion: the conclusion is almost always an artefact of the two rates the author chose.

The useful way to use the model is therefore not to run it once. Run it with your realistic figures, then run it again with the growth rate a couple of points lower and the return a couple of points higher, and see whether the answer changes. If it does, the honest conclusion is that the financial case is a coin flip and the decision should be made on the non-financial grounds instead.

Leverage, which cuts both ways

A mortgage is leverage, and it is the reason buying can win despite modest appreciation. A 20% deposit means a 5% rise in the home's value is a 25% gain on the money you put in. That multiplier is the strongest argument for buying and it is entirely real.

It is also symmetrical. A 5% fall is a 25% loss on the deposit, and unlike a portfolio you cannot sell a quarter of a house to rebalance. Negative equity means you cannot move without finding the shortfall in cash, which turns a job offer in another city into a financial problem. The model above shows the upside of leverage in the good scenarios; put a negative appreciation rate in and it will show you the other side just as clearly.

Frequently asked questions

Why does the renter invest the difference?
Because otherwise the comparison is not between renting and buying, it is between saving and spending. The buyer's deposit and closing costs are money that could have been invested, and in most months their total outgoing is larger than the rent. If the renter spends that gap, buying wins every comparison automatically and the model has proved nothing. Assuming it is invested is what isolates the housing decision from the savings decision.
Which input matters most?
How long you stay. Buying carries large one-off costs at both ends — stamp duty or transfer tax and legal fees going in, agent fees coming out — and they have to be earned back before ownership is worth anything at all. On a two or three year horizon almost nothing else matters. Past about seven to ten years the running costs and the growth assumptions start to dominate, and the answer becomes genuinely uncertain rather than obviously one way.
Why is no tax relief included?
Because it is entirely local and it changes with every budget. Mortgage interest deduction exists in some countries and not others, capital gains treatment of a main home differs everywhere, and stamp duty is banded differently in each market. Guessing at any of it would produce a figure that looks precise and is wrong in a way you could not see. Instead the buying and selling costs are plain percentages, so whatever applies where you are goes straight in.
Is 1% a year enough for maintenance?
It is the common rule of thumb and it is roughly right as a long-run average on an ordinary house, but it does not arrive smoothly. Roofs, boilers, windows and rewiring come as four- and five-figure lumps years apart, and the average only looks like an average over a decade or more. A new build under warranty costs less at first and more later; an older property can run well above 1%. If you are on a short horizon, what matters is which lumps land inside it.
Does this tell me whether to buy?
No. It compares two cash flows under assumptions you supply, and every one of those assumptions is a guess about the future — house prices, investment returns, rent increases, how long you stay, whether your income holds. It also cannot price the things that usually decide the question: the security of a place that is yours, the flexibility of being able to leave in a month, and what maintaining a property costs in weekends. Treat the output as one input to a decision, not the decision.

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