Plot No. 31 · Money & Finance
Rent vs Buy Calculator
Compare the net cost of renting against buying over the years you plan to stay. Buying adds up your deposit, mortgage payments and maintenance, then subtracts the equity you build as you pay down the loan and the home grows in value. Renting is simply your monthly rent over the period. The tool shows which works out cheaper and by how much.
Simplified model. Buying cost is deposit plus mortgage payments plus 1% of price a year in maintenance, minus the equity you hold at the end. It excludes stamp duty, fees, rent rises and the return on investing your deposit elsewhere.
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How the rent vs buy comparison is worked out
This calculator compares the net cost of renting against buying over the years you plan to stay. For buying it sums your deposit, total mortgage payments over the stay and maintenance at 1% of the price a year, then subtracts the equity you hold at the end. Equity is the home's grown value minus the mortgage balance still outstanding. For renting it simply totals your monthly rent over the same period. The lower net cost wins.
The monthly mortgage uses the standard repayment formula on the loan (price minus deposit) at your rate over the full term, and the calculator amortises the loan to find the balance left after your stay. Because rent is money you never recover while mortgage payments build equity in an appreciating asset, a longer stay tends to favour buying and a short one favours renting.
How to use the rent vs buy calculator
- Enter your monthly rent for the equivalent home.
- Enter the property price, your deposit, the mortgage rate and term.
- Set how many years you will stay and an assumed annual house price growth, then read which option is cheaper and by how much.
Worked examples
Five-year stay, buying wins
Inputs: Rent 1,200, price 250,000, deposit 25,000, 5% rate over 25 years, staying 5 years, 3% growth
Result: Net cost of buying about 25,907 against 72,000 in rent, so buying is cheaper by roughly 46,093. The monthly mortgage is about 1,315.
No growth shrinks the gap
Inputs: Same figures but 0% house price growth
Result: With no appreciation the home value stays at 250,000, equity falls, and the net cost of buying climbs to about 61,725, narrowing buying's lead over the 72,000 of rent.
Limitations and common mistakes
Edge cases and limitations
- It is a transparent simplified model. It excludes stamp duty, legal and survey fees, and selling costs when you move on.
- It ignores the return you could earn by investing your deposit and any monthly saving instead of buying.
- It assumes level rent and a fixed mortgage rate for the whole stay, when both usually change over time.
Common mistakes
- Comparing a short stay (one or two years) where upfront costs have no time to spread, then concluding buying is always cheaper.
- Entering an optimistic house price growth rate, which flatters buying by inflating end equity.
Frequently asked questions
Is it cheaper to rent or buy?
It depends on how long you stay, the rate, and house price growth. With the defaults here (£1,200 rent, a £250,000 home with a £25,000 deposit at 5% over 25 years, staying 5 years and 3% growth) buying costs about £25,907 net against £72,000 in rent, so buying wins by roughly £46,093. Shorten the stay or remove growth and renting can come out ahead.
Why does buying often beat renting over time?
Because rent is money you never get back, while a chunk of every mortgage payment buys equity in an asset that may also rise in value. The longer you stay, the more equity you build and the more upfront buying costs are spread out, which is why a short stay tends to favour renting and a long one favours buying.
What does this calculator leave out?
It is a simplified model. It excludes stamp duty, legal and survey fees, the return you could earn by investing your deposit instead, rent rises over time, and selling costs. It assumes level rent and a fixed mortgage rate. Treat the result as a directional guide, not a precise forecast.
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