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Rent vs Buy Calculator

The year buying overtakes renting, once selling costs are counted.

Inputs
$
10%
6.25%
$
years
3%/yr
3%/yr
Cheaper over 7 years
Renting
BuyLean buyLean rentRent

Lean rent

Net cost of buying
157,124.49$
Net cost of renting
146,488.54$
Renting saves
10,635.94$
Monthly mortgage (P&I only)
1,939.51$
Cash needed up front
45,500.00$
Equity after selling costs
121,022.69$
Buying overtakes renting in year
9
Compare money out, less what you own at the end, on both paths

Assumes a 30-year mortgage, property tax 1.1%, insurance 0.5% and maintenance 1% of value a year, 3% to buy and 6% to sell, and that a renter invests the deposit at 5%. Ignores tax relief on mortgage interest, which varies by country.

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Buying beats renting once the equity built exceeds the money sunk into interest, tax, maintenance and transaction costs. That crossover is usually several years out, because buying and selling together cost around nine percent of the price.

How to use Rent vs Buy Calculator

  1. Enter the price and the rent for the same home. Compare like with like — the rent for the property you would actually buy, not a smaller one.
  2. Set how long you expect to stay. This matters more than any other input, because transaction costs are paid once and spread over that period.
  3. Read the break-even year. The needle shows how many years buying needs before it overtakes renting on these assumptions.

About renting versus buying

The rent-versus-buy question is usually argued with the wrong number. Comparing a monthly rent against a monthly mortgage payment ignores almost everything that makes owning expensive: property tax, insurance, maintenance, and the interest that dominates the early years of a loan without building any equity at all. It also ignores what a deposit would have earned somewhere else, which for a substantial sum over several years is not a rounding error. The dominant factor is time, because transaction costs are paid once. Buying typically costs two to five percent of the price in fees and closing costs, and selling another five to six percent in agent commission and legal work — so roughly nine percent of the value has to be recovered before ownership breaks even against renting. Price growth can do that quickly in a rising market and never in a flat one, which is why the break-even year here moves so sharply with the growth assumption. Leverage cuts both ways for the same reason: a deposit of ten percent means a five percent fall in price removes half of your equity before any selling costs. None of this makes renting better or buying better in general. It makes the answer specific to a price, a rent, a rate and above all a length of stay, and it means anyone planning to move within a few years is usually better off renting on the arithmetic alone.

Frequently asked questions

How long do I need to stay for buying to make sense?
Commonly five to seven years on typical assumptions, because roughly nine percent of the price goes on buying and selling costs. A shorter stay rarely recovers them, whatever happens to prices.
Why does renting count investment returns?
Because a renter keeps the deposit and closing costs rather than sinking them into a house. Comparing a mortgage against rent alone ignores what that money would otherwise earn, which flatters buying.
Is paying rent really throwing money away?
No more than mortgage interest is. In the early years of a mortgage most of the payment is interest, which builds no equity either — along with tax, insurance and maintenance, all of which a renter avoids.
What is not included here?
Tax relief on mortgage interest, which varies enormously by country, and any mortgage insurance charged on a deposit below twenty percent. Both shift the comparison and neither is universal.
What if prices fall?
Set the growth rate negative. Because a deposit is leveraged, a small fall in price is a large fall in equity — a five percent drop on a ten percent deposit removes half of it, before selling costs.

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