Rent vs buy calculator

How are renting and buying compared?

A rent vs buy calculator compares the total wealth a buyer builds through mortgage repayments and rising property values against the total wealth a renter accumulates by investing their deposit and monthly savings at a chosen rate of return over the same period. The comparison accounts for transaction costs on both sides rather than treating the deposit as free money.

The buyer puts down a deposit plus upfront costs, pays a repayment mortgage and yearly maintenance, and builds equity as the balance falls and the value grows. Their wealth at any point is the home value after selling costs, minus the outstanding mortgage, plus anything invested in months when buying was cheaper than renting.

The renter starts with the same deposit and buying costs, but invests that cash instead of committing it to a home. Each month, whatever is saved by renting rather than buying is invested, and the pot grows at the chosen return. This is the opportunity cost most rent-versus-buy tools quietly ignore: money locked in a house is money not compounding elsewhere. Buying tends to win the longer someone stays, because equity builds and level mortgage payments fall behind rising rent.

Is it better to rent or buy?

Buy a £300,000 home with a £30,000 deposit and £8,000 of costs, against renting the same place for £1,200 a month. With 3% house growth, a 5% investment return and 3% rent rises, buying is estimated to pull ahead around year 3. After 25 years the buyer is estimated to be worth £648,240 against the renter's £291,817. A higher investment return or a shorter stay can make renting look better.

What costs does a buyer face that a renter avoids?

Buying a home involves a stack of upfront and ongoing costs that renters never pay. Stamp duty on a £300,000 property in England depends on whether the buyer qualifies for first time buyer relief, but the bill can run to several thousand pounds. Solicitor fees typically fall between £800 and £1,500. A homebuyer survey costs between £300 and £600, and some mortgage lenders charge a product or arrangement fee on top.

Once the purchase completes, the costs continue. Buildings insurance is compulsory for mortgage holders. Maintenance, covering boiler servicing, roof repairs and general upkeep, averages roughly 1% of the property value each year. Leaseholders and flat owners also pay a service charge and possibly ground rent. When the time comes to sell, estate agent fees of around 1.5% of the sale price plus solicitor fees again eat into the proceeds.

The calculator above models maintenance at 1% of the home value per year and selling costs at 2%, so the buyer wealth figure already reflects these drains on equity. Ignoring them is the usual reason simple comparisons flatter buying.

How does the deposit opportunity cost work?

The deposit is not just money spent. It is money that can no longer compound elsewhere. Locking £30,000 into a home means that sum cannot grow at the 5% return available in a diversified portfolio. Over 25 years at 5% per year, £30,000 would grow to roughly £101,590 if left invested.

The calculator handles this honestly by giving the renter both the deposit and the upfront buying costs as a starting investment pot. Each month, the difference between the rent and the equivalent mortgage payment is also added to or drawn from that pot. The result is a fair side by side comparison of two uses of the same money: property equity on one side, invested savings on the other.

This opportunity cost is the single biggest reason renting can win in the short term. A buyer who sells after three or four years may find that stamp duty, legal fees and selling costs wiped out most of the equity gained, while the renter's invested deposit kept compounding uninterrupted.

When does buying typically overtake renting?

On the example figures above, with 3% house price growth, a 5% investment return and 3% annual rent rises, buying is estimated to overtake renting around year 3. The crossover point depends heavily on all three assumptions, but for a wide range of realistic UK figures, buying typically pulls ahead somewhere between year 8 and year 12.

Two forces drive the shift. First, the mortgage balance falls with every repayment while the property value tends to rise, so equity accelerates over time. Second, rent usually increases year on year while a repayment mortgage stays level in nominal terms, so the buyer's housing cost falls further behind the renter's as the years pass.

Below about five years, buying rarely wins after transaction costs are included. Stamp duty, solicitor fees and estate agent commissions on both the purchase and the eventual sale consume a large share of any equity built in a short holding period. The calculator makes this visible: set the horizon to five years and compare the two wealth figures.

What if house prices fall?

A fall in house prices hits a buyer far harder than a renter. If a £300,000 home drops 10% to £270,000, a buyer who put down £30,000 has lost their entire deposit in paper terms. The mortgage still stands at its original balance, so the home is worth less than the debt secured against it. This is negative equity.

A renter who invested the same £30,000 at 5% is unaffected by the property market. Their pot continues to compound regardless of what happens to local house prices. This asymmetry is the core risk of buying with a small deposit and a short planned holding period.

The calculator lets you set house price growth to 0% or a negative figure to model a downturn. Entering minus 2% per year, for example, shows how quickly buyer wealth erodes when a falling market meets fixed mortgage debt and ongoing maintenance costs.