🏡 Rent vs Buy Calculator
Buying is not automatically better than renting, and the crossover is usually years later than people assume. This compares the full cost of both over the time you plan to stay, including the ownership costs that never make it into the conversation.
The year buying overtakes renting, and the costs both sides forget
Rent against buy is usually argued as a matter of principle — dead money against building equity — when it is really a matter of arithmetic with a crossover point. Buying starts expensive, because of the deposit and the transaction costs, and gets cheaper relative to renting over time. The only question worth asking is how many years it takes to cross over, and whether you will still be there.
Buying wins once: cumulative cost of owning < cumulative cost of renting
Both sides of that comparison have to include the money that is not the obvious payment, which is where most back-of-envelope versions go wrong.
What owning costs beyond the mortgage
The mortgage payment is the figure people compare with rent, and it is roughly two thirds of the real cost. Add property tax, buildings insurance, maintenance, and any service charge or ground rent. Maintenance is the one most often set to zero: a reasonable long-run allowance is 1% of the property value a year, which on a $400,000 house is $333 a month that does not appear on any bill until the roof goes.
| Cost | Monthly | Annual |
|---|---|---|
| Mortgage payment | $2,023 | $24,276 |
| Property tax at 1.1% | $367 | $4,400 |
| Insurance | $125 | $1,500 |
| Maintenance at 1% | $333 | $4,000 |
| Total cost of owning | $2,848 | $34,176 |
| Of which builds equity | $298 | $3,577 |
Against rent of $2,200 a month, owning costs $648 more every month, of which $298 goes into the house and $350 vanishes. The usual framing — that rent is dead money while a mortgage is not — is only true of the principal portion, which in the first year is under 15% of the mortgage payment. The amortization calculator shows how slowly that share grows.
The deposit has an opportunity cost
A renter who does not buy keeps the deposit and the transaction costs invested. On the house above, that is $80,000 plus roughly $12,000 of closing costs: $92,000 which, compounding at 6% a year, becomes $123,000 after five years and $165,000 after ten. Any honest comparison counts that growth on the renting side, because it is a real alternative use of the same money.
This is the single most important term in the calculation and the one most often omitted. Leaving it out can shift the break-even point by several years, and it is why the answer changes so much with assumed investment returns. See the investment calculator for what the same deposit does if left invested.
Transaction costs are the reason short ownership almost never pays. Buying costs roughly 2% to 5% of the price; selling costs another 5% to 8% once agency fees are counted. Ten percent of the value has to be recovered through appreciation and equity before you are level, which at 3% annual growth takes over three years before any other cost is considered.
Where the break-even usually lands
| House price growth | Rent inflation 2% | Rent inflation 4% |
|---|---|---|
| 1% a year | Year 11 | Year 8 |
| 2% a year | Year 8 | Year 6 |
| 3% a year | Year 6 | Year 5 |
| 5% a year | Year 4 | Year 4 |
Across a wide range of plausible assumptions the answer clusters between four and eight years. That is the practical takeaway: if you are confident of staying put for at least five years and can cover the deposit without raiding your emergency fund, buying usually wins. If there is a realistic chance of moving within three, renting almost certainly wins, whatever the market is doing.
The things the arithmetic cannot price
Owning buys control — no landlord ending the tenancy, no restriction on repainting a wall — and buys a fixed housing cost that inflation erodes, which over twenty years is a substantial hidden return. Renting buys mobility, the ability to take a job in another city without a sale, and freedom from a boiler that fails in February.
It also matters that a mortgage is leverage. A 20% deposit means a 10% fall in prices removes half your equity, and a 10% rise doubles your return. That cuts both ways and is rarely stated explicitly when housing is described as a safe investment.
A worked example
A couple pays $1,750 a month in rent and is considering a $320,000 flat with 10% down at 6.75%. Owning costs $2,553 a month all in, against $1,750 rent: $803 a month more, of which $256 builds equity. Their $32,000 deposit plus $9,000 of costs would otherwise grow at 6%. With house prices rising 2.5% a year and rent rising 3%, the crossover arrives in year seven. They expect to want more space within four years, so on these numbers renting is the cheaper choice — and the house affordability calculator suggests waiting also puts them in reach of the larger flat they will actually need.
Once you have this figure, the mortgage calculator is where it usually goes next. the house affordability calculator is the related one people reach for afterwards.
Frequently Asked Questions (FAQs)
How many years do I need to stay for buying to pay?
Usually five or more. Across plausible assumptions about house price growth and rent inflation the break-even clusters between four and eight years, driven mainly by the 10% or so of the property value lost to buying and selling costs.
Is renting really throwing money away?
No. Rent buys housing for a period, exactly as a mortgage interest payment does — and in the early years of a mortgage, interest is the large majority of the payment. Only the principal portion builds equity, and in year one that is typically around a seventh of what you pay.
What costs do people forget when buying?
Maintenance, usually set to zero when a realistic long-run figure is about 1% of the value a year; property tax; buildings insurance; service charges; and the cost of selling. Together they often add 40% to the mortgage payment.
Should I count the deposit as a cost?
Not as a cost, but its opportunity cost belongs in the comparison. A renter keeps that money invested, so the returns it would have earned count on the renting side. Omitting this is the most common error and can move the break-even by years.
Does it matter what happens to house prices?
It changes the break-even year but rarely the broad conclusion. Faster growth brings the crossover forward and slower growth pushes it back, but even at 1% annual growth buying still overtakes renting around year eight to eleven if you stay.
Is a mortgage cheaper than rent?
The payment often is, which is why the comparison is misleading. Once tax, insurance, maintenance and the opportunity cost of the deposit are included, the true monthly cost of owning usually exceeds rent for the first several years.
What if I might move for work?
That strongly favours renting. Transaction costs make short ownership expensive, and being unable to sell quickly can cost you the job as well as the money. Mobility has a real financial value that the standard comparison leaves out.