Rent vs Buy Calculator

The wrong question, asked correctly

"Is renting throwing money away?" is the wrong question. Mortgage interest, maintenance, insurance, and transaction costs are also money that doesn't come back. The right question is: over a specific time horizon, which option leaves you with more net worth? This calculator answers that — but the answer depends heavily on inputs most people don't think about carefully.

The price-to-rent ratio: a quick first filter

One common first filter is the local price-to-rent ratio. Take the property purchase price and divide by 12 times the monthly rent for an equivalent property. Ratios under 15 tend to favour buying; above 20 tend to favour renting; 15–20 is the grey zone where other factors dominate. Some expensive cities run 25–35 for most homes, which is structurally buy-unfriendly territory; lower-cost areas run 8–12, which is buy-friendly. Running this simple ratio before the detailed calculation gives a sense of whether the answer will be obvious or close.

The five costs people forget when buying

Mortgage payments are the obvious cost. Here's what tends to get left out:

Transaction costs. Buying commonly costs 3–5% of the purchase price (purchase taxes, legal, survey, and lender fees). Selling adds more, and this varies by market — often 1–3% where agent fees are low and 5–8% where full-service agents are standard. On a 350,000 property, combined round-trip costs often land somewhere between 15,000 and 35,000. If you move within five years, these often exceed any equity built up.

Maintenance. A commonly cited range is 1–2% of property value a year for running repairs, plus occasional large capital items. This calculator assumes 1.5%. On a 350,000 home that's about 5,250 a year, with lumpy spikes when a roof, heating system, or kitchen each run into five figures.

Opportunity cost of the deposit. A 70,000 deposit invested in a diversified portfolio returning around 6% a year would grow to roughly 125,000 over 10 years. That's the return the deposit money is not earning while it sits in the walls.

Insurance. Buildings and contents cover, sometimes mortgage or income protection, commonly a few hundred a year.

Resale gains are uncertain. Property price changes don't guarantee gains. National house-price indices have often risen around 4–5% a year nominally over the long run, but that's before inflation (net roughly 2%), and individual properties can lag or lead the index by wide margins. This tool assumes 4% nominal growth.

The two costs people forget when renting

Renting isn't cost-free either.

Rent inflation. The figure you enter is today's rent, but it goes up. Rents can rise several percent a year, and in some markets have risen much faster in recent years. A 10-year projection using today's rent understates the total meaningfully. Modelling that reflects this uses an inflation-adjusted real rent figure or projects a few percent of annual increase. This calculator holds rent flat, so it is conservative on the renting side.

Tenure uncertainty. Many rental agreements run 6–12 months with no guarantee of renewal. Forced moves carry costs each time (moving, a new deposit, and agent fees where still charged). Over 10 years of renting, three to five moves is common — several thousand in friction costs that owner-occupiers don't face.

When renting can come out ahead

Despite the cultural pressure to buy, renting can come out financially ahead in several scenarios: you expect to move within 5 years, you live in a high price-to-rent area, your career is likely to require geographic flexibility, you haven't yet maxed tax-advantaged retirement account contributions (which can offer better tax-advantaged returns than home equity), or the deposit would come from liquidating investments with tax consequences. Running this calculator with honest inputs often shows that an emotional preference for buying doesn't survive contact with the numbers.

When buying tends to win

Buying tends to come out ahead when: you plan to stay 7+ years, the price-to-rent ratio is under 20, you'd otherwise have a large deposit sitting in savings earning little, the property has genuine scope for improvement, or your rental market is unstable with frequent forced moves. Emotional factors — security, personalisation, a place to put down roots — are real even though they don't appear in this calculator. The emotional side carries a value this tool can't quantify.

The financial-flexibility argument

Owner-occupiers are wealthier on average, but often less liquid. A 500,000 home is not 500,000 in the bank; accessing it requires selling (costly, slow) or remortgaging (adds debt). Renters with comparable net worth typically hold more of it in liquid investments, which means more options when circumstances change. Neither position is universally better — but the liquidity difference is worth understanding before committing to a decade of owner-occupation.

What this calculator doesn't capture

The tool models financial outcomes over your entered time horizon. It doesn't model the commute difference between areas you'd rent versus areas you'd buy, the quality-of-life gap between typical rentals and typical owner-occupied homes in your market, or the psychological value of security of tenure. Those can legitimately tip the decision either way. The financial number is one input into a broader judgment, not the whole answer.