Rent vs buy: comparing them properly

The usual comparison — mortgage payment against rent — leaves out most of what matters. Here's a fuller model.

"Why pay rent when you could be paying a mortgage?" is the most common framing, and it is close to useless. It compares one number against another while ignoring the down payment, the costs of buying and selling, maintenance, taxes, and what the money would have done if it hadn't gone into a house.

What an honest comparison includes

Buying carries costs that renting doesn't: closing costs, property tax, insurance, maintenance — typically around 1% of the value each year — and selling costs at the end, usually several percent. It also builds equity and exposes you to appreciation, which is the upside.

Renting carries an advantage that is easy to miss: the money not spent on a deposit and closing costs can be invested. The honest question is not "which monthly payment is smaller" but "after N years, which path leaves me with more" — counting the house you'd own and sell against the portfolio you'd have built.

That is what this calculator models. Both paths start with the same money. The buyer spends the deposit; the renter invests it. Each month, whoever pays less invests the difference. At the end, the buyer's wealth is their sale proceeds plus any investments; the renter's is their portfolio.

Step-by-step

1. Open the calculator. Go to Calculators and choose "Rent vs Buy".
2. Enter the purchase side — price, deposit, rate, term, closing costs, tax, insurance, HOA, maintenance.
3. Enter the rental side — rent, expected annual increase, renter's insurance.
4. Set your assumptions — home appreciation, investment return, and how long you expect to stay.
5. Read the year-by-year table and the break-even point.

The assumptions that dominate

• How long you stay. The costs of buying and selling are front- and back-loaded, so short stays favour renting heavily. Under about five years, buying rarely wins.
• Appreciation versus investment return. These two numbers drive the result more than anything else, and nobody knows either. Try pessimistic values, not just hopeful ones.
• Whether the renter really invests the difference. The model assumes they do, every month. In practice most people spend it, which quietly favours buying as a forced savings mechanism.

Frequently asked questions

Does this include tax relief on mortgage interest?

No. Tax treatment varies enormously by country and circumstance, and a wrong assumption would be worse than none. If it applies to you, treat the result as slightly favouring renting.

Is it a prediction?

No — it is a scenario model. It tells you what follows from your assumptions, not what the market will do.

Is my data private?

Yes. Everything runs in your browser and nothing is transmitted.