Rent vs Buy Calculator
A full comparison over the years you expect to stay, including the ownership costs people leave out and what your deposit would have earned elsewhere.
In short
Buying beats renting only after enough years to recover the transaction costs, typically five or more. The comparison has to include maintenance, insurance, transfer taxes and what the deposit would have earned elsewhere, not just the mortgage payment against the rent.
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Why the usual comparison is wrong
Almost every rent-versus-buy conversation compares a monthly mortgage payment against a monthly rent, decides the payment is similar or lower, and concludes that buying is obviously better because you own something at the end.
That comparison omits most of the cost of owning. Maintenance, buildings insurance, service charges, property taxes, the tax you paid to buy, the commission you will pay to sell, and the return your deposit is not earning. Added together these routinely come to as much again as the mortgage payment.
It also treats the whole mortgage payment as if it built equity. In the early years of a typical loan, most of it is interest, and interest is gone in exactly the way rent is gone.
The costs of buying, in full
- Transaction costs. Transfer or stamp taxes, legal fees, searches, survey and mortgage arrangement. Commonly 3% to 6% of the price on the way in, and 1% to 3% on the way out.
- Mortgage interest. Not equity. On a 255,000 loan at 4.5%, the first year alone costs around 11,000 in interest.
- Maintenance. The rule of thumb is 1% of the value a year, averaged. It arrives lumpily: nothing for four years, then a roof.
- Insurance, tax and charges. Buildings insurance, property or council tax, and for flats a service charge and ground rent that you do not control.
- The forgone return. A 45,000 deposit earning 5% elsewhere would grow to about 63,000 in seven years. Giving that up is a real cost of buying, and it is the one people almost never count.
The costs of renting, in full
Rent, contents insurance, and rent increases. That is genuinely most of it, which is why renting is simpler to evaluate and easier to underestimate over long horizons, since rent compounds while a fixed mortgage payment does not.
The offsetting advantage is that a renter's deposit stays invested. A fair comparison credits the renter with the growth on the money a buyer would have put into the property and the transaction costs, which is what the calculation above does.
What buying actually buys you
Leverage. A 15% deposit gives you exposure to the full value of the asset. If prices rise 3%, your equity rises by far more in percentage terms. Leverage also works in reverse, which is the part that gets forgotten in rising markets.
A fixed housing cost. Once the mortgage is paid, your housing cost drops to maintenance and taxes. Rent never stops. Over thirty or forty years this is the strongest financial argument for owning, and it only appears at horizons far longer than most calculators use.
Control. You can decorate, keep animals, and not be asked to leave. These are worth real money to some people and nothing to others, and no calculator can price them for you.
What renting buys you
Flexibility. The ability to take a job in another city with two months' notice rather than a six month sale. For people early in a career this can be worth more than the entire cost difference.
Capped downside. Your boiler is someone else's problem, and so is a falling market. A renter in a 20% price decline loses nothing.
Liquidity. Money in an index fund can be reached in days. Money in a house takes months and costs several percent to release.
How to use the result honestly
Set house price growth to zero and see whether buying still wins. If it does, the case stands on its own without needing the market to cooperate. If it only wins at 5% growth a year, you are not comparing housing costs; you are making a leveraged bet on prices, which may still be reasonable but should be a decision you make knowingly.
Then vary the years you stay. The break-even horizon is the number that matters most, and it is also the assumption you have the least control over.
Frequently asked questions
How many years before buying beats renting?
Usually five or more, though it varies enormously by market. The costs of buying and selling, typically 5% to 10% of the price once transfer taxes, legal fees and agent commission are counted, have to be recovered before ownership is ahead. Below that horizon, renting is generally cheaper.
Is rent really dead money?
No more than mortgage interest is. In the early years of a mortgage most of the payment is interest, which buys you nothing either. Rent buys you housing and flexibility; interest buys you leverage on an asset. Only the principal portion builds equity.
What costs do people forget when buying?
Maintenance at roughly 1% of the property value a year, buildings insurance, service charges or ground rent, property taxes, and the transaction costs at both ends. Together these often add 40% to 50% on top of the mortgage payment, which is why the payment-versus-rent comparison misleads.
Should I count what my deposit would have earned?
Yes. A deposit sitting in a house is not invested elsewhere, and that forgone return is a genuine cost of buying. It is the single largest item most comparisons leave out, and over a decade it can exceed the stamp duty several times over.
Does this predict house prices?
No, and neither does anything else. You supply an assumed appreciation rate and the calculation shows what follows from it. Try it at zero, and if buying still wins on your numbers, the case does not depend on the market rising.