Rent vs buy calculator

The question is how long you stay

Renting and buying are usually compared on the monthly payment, which is the one comparison guaranteed to mislead. Buying front-loads a large cost, gives some of it back at the end, and charges for a set of things a tenant never pays. Whether it wins depends almost entirely on how long the money stays in the property, because the costs of buying and selling are paid once and have to be spread over the years you are there.

That is what the break-even year on this page is. Every row of the table is its own complete comparison, with the home bought at the start and sold at the end of that year, and the cost of selling taken off. It is not a running total: selling happens once, and a comparison that leaves it out flatters buying in every single year.

Everything is in today's money

Both sides are discounted at the return you would earn on the money if you did not buy. That single rate does two jobs. It makes a payment ten years away comparable with one next month, and it charges the buyer for the deposit being tied up in a house rather than invested. A comparison that builds a separate investment account for the renter is doing the same thing with two numbers that have to be kept in step; this does it with one.

Turn the rate up and renting improves, because the money the renter is not spending on a deposit works harder. Turn it down and buying improves. It is the most sensitive input on the page after house price growth, and it is worth moving both before treating any answer as settled.

The costs people forget

Maintenance is the big one, and it is charged here as a share of what the home is worth at the time rather than of what it cost, because that is how it behaves. Property tax, insurance and any service charge are the rest of the running costs a tenant does not pay. On the way in there are buying costs, and on the way out the cost of selling, which is usually the larger of the two and the one most often left out of the comparison entirely.

What is not here is as important. There is no tax relief on mortgage interest and no tax on the gain when the home is sold, because both depend on where you live, on the rest of your return, and on rules that change. House prices cannot fall on this form, so a growth rate of nothing is the pessimistic case available. The full list sits beside the method note, and it is worth reading before treating the verdict as a decision.

Common questions

What should I put for house price growth?

Something you would defend. It is the input the answer is most sensitive to over a long comparison, and it is the one nobody knows. A sensible approach is to try a rate near long-run inflation, then a rate well below it, and see whether the break-even year moves into or out of the period you actually plan to stay.

Why does buying look worse than I expected in the early years?

Because the costs of buying and selling are both charged in full, and in the early years there are few years to spread them over. Early mortgage payments are also mostly interest, so little of the money is turning into equity yet. Both effects are real, and both are why moving frequently and buying rarely mix well.

Can I compare a cash purchase?

Yes. Set the mortgage length to nothing and the whole price is treated as paid up front, with no mortgage payments and nothing owed at the sale. The deposit field then carries the purchase, and the discount rate charges you properly for the money being tied up.

Why is the mortgage worked out separately?

Because the payment on a repayment mortgage is defined by a schedule that clears the balance to exactly zero, which is the loan calculator's job on this site. This page asks that calculation for the schedule and then values it along with everything else, so the payment here and the payment on the mortgage pages are the same number rather than two numbers that ought to match.

Is anything I type stored?

No. The calculation happens on the server as part of rendering the page, nothing is written down, and the access log for this site drops the query string precisely so that the numbers you enter are never recorded.