What the Rent vs Buy Calculator does
This rent vs buy calculator compares the financial result of buying a home with renting a similar one over the number of years you expect to stay. It counts the deposit, buying and selling costs, mortgage payments, property tax, maintenance, insurance and service charges on one side, rent and renter's insurance on the other, and - crucially - what the money not spent on a deposit or on higher monthly costs would earn if it were invested instead.
The answer is the difference in wealth between the two households at the end, the year in which buying first comes out ahead, and a sensitivity table showing how the result changes if house prices, investment returns, rent growth, the mortgage rate or maintenance turn out differently. Every assumption is yours; nothing is looked up.
How to use it
- Enter the home price, deposit, mortgage rate and term, and the one-off costs of buying and selling as percentages.
- Enter the yearly owner costs: property tax and maintenance as a percentage of the home's value, insurance and any monthly service charge.
- Enter the rent for a comparable home, how fast you expect rent and house prices to grow, and the return you would earn on money you invest instead.
- Set how many years you will stay, then read who is ahead, the break-even year and the sensitivity table.
Reading the results
Buyer's wealth is the home's value after selling costs minus the mortgage still owed, plus any savings the buyer made in months when owning cost less than renting. Renter's wealth is the invested deposit and buying costs plus the monthly differences they invested.
The break-even year is the first year-end at which the buyer's wealth is at least the renter's. Short stays favour renting because buying and selling costs have to be recovered first.
If a small change to one assumption flips the answer, the decision really rests on that assumption - usually house price growth or the investment return - not on the calculator.
Worked example: small cases you can check by hand, and the page's default
A cash buyer pays 200,000 for a home instead of renting one for 1,000 a month, with no costs, no growth and no investment return. After a year the buyer still has the 200,000 home and has avoided 12,000 of rent, which the method assumes is saved; the renter has 200,000 invested at 0%. The buyer is 12,000 ahead - one year of rent.
Now a 100,000 home with a 20% deposit and a 0% mortgage over 10 years: the payment is 80,000 / 120 = 666.67 a month. If rent is also 666.67, monthly costs are equal, and after a year the buyer's equity is 20,000 + 12 x 666.67 = 28,000 against the renter's 20,000 - buying is ahead by the 8,000 of mortgage repaid.
The page's default - a 400,000 home, 20% down, 6% over 25 years (a 2,061.76 monthly payment), rent of 1,800 and 3% growth in both prices and rent, 5% on investments - leaves renting ahead after 10 years, and buying first breaks even in year 15. Lower price growth by 2 points and renting wins by far more; raise it by 2 and buying wins.
Formulas and scoring rules
- Mortgage payment
PMT = L x i / (1 - (1 + i)^-n), i = rate / 12, n = years x 12- Owner's monthly cost
mortgage payment + value x (property tax + maintenance) / 12 + insurance / 12 + service charge- Invested difference
each month the household that spent less invests the difference at (1 + return)^(1/12) - 1- Buyer's wealth
value x (1 - selling costs) - mortgage balance + buyer's investments- Renter's wealth
(deposit + buying costs) invested from day one + monthly differences invested- Growth
home value grows monthly at (1 + growth)^(1/12) - 1; rent steps up once a yearFigures shown to the nearest whole unit.
Why the invested deposit matters so much
A simple comparison of rent against mortgage payments leaves out the biggest item: the deposit and buying costs could have been invested. At 5% a year, 92,000 grows to about 150,000 in ten years. That opportunity cost is why renting can come out ahead even when rent is similar to a mortgage payment.
Equally, the method assumes the renter really does invest the difference and the buyer really does invest any monthly saving. If in practice the money would be spent, the comparison tilts towards buying, because a mortgage is a form of forced saving.
Limitations: what the result does not prove
- Taxes are not modelled: capital gains, mortgage interest relief, stamp duty bands and tax on investment returns vary by country and person. Add one-off taxes to the buying costs.
- It assumes constant growth rates and a fixed mortgage rate. Real house prices, rents and rates move unpredictably, sometimes sharply.
- Non-financial factors - security, flexibility, the freedom to renovate or to move - are not in the numbers and often decide the question.
- It is a comparison model, not mortgage or financial advice.
Privacy: where your data goes
Everything you paste, type or drop is processed in this browser tab. It is not uploaded, logged, stored or sent to analytics. Session recording and tag-manager scripts are switched off on this page.
Standards and sources
Frequently asked questions
Is it cheaper to rent or buy a house?
It depends on how long you stay, local prices and rents, your mortgage rate, and what your money would earn otherwise. Over short stays renting usually wins because buying and selling costs are large; over long stays buying often wins if prices keep up with inflation. Enter your own figures to see.
How long do I need to stay for buying to pay off?
Look at the break-even year. With the page's default assumptions it is year 15; with cheaper buying costs, higher rents or faster price growth it comes sooner. If you expect to move before the break-even year, renting is likely the better financial choice.
What return should I assume on invested savings?
Use what you would realistically earn on the deposit if you did not buy - a savings rate if you would keep it in cash, a cautious long-term figure if you would invest it. The sensitivity table shows how much the answer moves if you are 2 points out.
Does the calculator include mortgage principal as a cost?
No. Principal repayments build equity, so they appear in the buyer's wealth rather than as money lost. Interest, taxes, maintenance, insurance and buying and selling costs are the true costs of owning.
How much should I allow for maintenance?
A common planning range is 1% to 2% of the home's value a year, more for older properties. Enter what fits your home, and check the sensitivity row for maintenance to see how much it matters.
Why does the renter get the buying costs as savings?
Because the renter did not have to pay them. Both households are assumed to start with the same money; the renter keeps the deposit and buying costs invested from the first day, which is the fair comparison.
Last reviewed by the A2Z.Tools team against the sources listed above.
