How does this rent vs buy calculator compare the two?
It follows two households that start with the same cash and spend the same amount each month. The buyer uses the cash for the down payment and the buying costs. The renter keeps that cash invested. Every month each household pays its own housing costs, and whichever one pays less that month invests the difference at the growth rate you enter. That rate is treated as a yearly rate and applied monthly, so a full year of growth matches it exactly. At the end of each year the calculator adds up what each household owns.
For the buyer, that is the home's value less the cost of selling it, less the mortgage still owed, plus any money the buyer had left over and invested. For the renter, it is the investment pot. The gap between the two is the headline, and the year the buyer's line first rises above the renter's is the crossover year. The calculator states no preference: it shows the two net positions and leaves the reading to you.
How do you calculate whether renting or buying comes out ahead?
Work through the default inputs above one step at a time.
- Starting cash. A 20% down payment on $400,000 is $80,000, and 3% buying costs add $12,000, so both households start with $92,000.
- Monthly cost of owning in year 1. The $320,000 loan at 6.5% over 30 years costs $2,022.62 a month. Maintenance at 1% and property tax at 1% of $400,000, plus $1,200 of other owner costs, come to $9,200 a year, or $766.67 a month. Owning costs $2,789.28 a month.
- Monthly cost of renting in year 1. $2,000. The renter invests the $789.28 difference every month.
- Later years. Rent and the running costs rise by their growth rates each year, while the mortgage payment stays fixed, so the monthly gap narrows.
- The end of year 15. The home is worth $400,000 x 1.03^15 = $623,187. Selling costs of 6% take $37,391 and the loan still owes $232,189, leaving equity of $353,606. The renter's pot has grown to $332,633.
So after 15 years buying ends $20,974 higher. Show the working, under the result, repeats these five steps with whatever you enter.
What is the crossover year, and why does it move so much?
On the day of purchase the buyer is already behind. Of the $92,000 starting cash, $12,000 has gone on buying costs, and selling straight away would cost another $24,000, so the buyer's net position starts at $56,000 against the renter's $92,000. The buyer then has to make up that $36,000, plus whatever the renter's investments earn, through rising home value and falling debt.
On the default inputs that takes until year 13. After 10 years renting is still $12,373 ahead; after 20 years buying is $77,237 ahead; after 30 years, with the mortgage paid off, buying is $299,749 ahead. That is why the number of years you expect to stay matters as much as any rate. A short stay leaves the buyer little time to recover the cost of getting in and out, and the line chart beside the result shows the two paths drawing level and then separating.
Which inputs move the answer most?
Here is the 15-year default with one input changed at a time. A positive gap means buying's net position is higher.
| Input changed | New value | Buy minus rent after 15 years | Crossover year |
|---|---|---|---|
| None (defaults) | $20,974 | 13 | |
| Home price growth | 1% a year | -$99,139 | none |
| Home price growth | 5% a year | $182,504 | 4 |
| Growth on invested money | 3% a year | $93,065 | 8 |
| Growth on invested money | 7% a year | -$70,993 | none |
| Rent | $1,500 a month | -$138,864 | none |
| Rent | $2,500 a month | $180,812 | 5 |
| Rent growth | 5% a year | $110,587 | 9 |
| Mortgage rate | 7.5% | -$45,105 | none |
| Selling costs | 3% | $39,670 | 10 |
Two points of home price growth either way swing the result by more than $100,000, and so does $500 a month of rent. Faster home price growth, higher rent, faster rent growth and lower selling costs all favor buying; a higher mortgage rate or a higher return on invested money favors renting. Because these are guesses about the future, it helps to run a low, middle and high case rather than trust one line.
Worked examples in pounds and dirhams
The arithmetic is the same in any currency, and nothing is converted. Both examples use figures chosen for illustration, not quotes from any lender or market report.
| Inputs | Pounds | Dirhams |
|---|---|---|
| Home price and deposit | £300,000, 10% | AED 2,000,000, 25% |
| Mortgage | 4.5% over 25 years: £1,500.75 a month | 4.5% over 25 years: AED 8,337.49 a month |
| Buying and selling costs | 4% and 2% | 6% and 2% |
| Running costs | 1% maintenance, no property tax, £600 insurance | 1% maintenance, no property tax, AED 15,000 service charges |
| Rent | £1,300 a month | AED 10,000 a month |
| Growth: home, rent, investments | 3%, 3%, 4% | 2%, 3%, 5% |
| Buy: net position after 15 years | £313,381 | AED 2,033,672 |
| Rent: net position after 15 years | £146,074 | AED 1,375,053 |
| Crossover year | 3 | 5 |
In the pounds example the rent is close to the mortgage payment, so the renter has little to invest each month and buying pulls ahead quickly. In the dirham example the larger deposit and 6% of buying costs mean the renter starts with AED 620,000 invested, and buying needs five years to catch up.
Rent against interest, upkeep and fees: the unrecoverable costs
Some of what a buyer pays comes back. Each principal repayment lowers the loan and so raises equity. Other costs are gone once paid: mortgage interest, maintenance, property tax, insurance and fees, and the money spent on buying and selling. For the renter, the rent is the cost that is gone.
On the 15-year default the renter pays $446,374 of rent. The buyer pays $276,260 of mortgage interest, $171,110 of running costs and $49,391 to buy and sell, $496,762 in all. The buyer still finishes ahead because the home's value rises by $223,187, enough to cover the extra $50,388 of costs and the $151,825 the renter's investments earn, with $20,974 to spare. A cost-only view leaves out both the rise in value and the growth on the renter's savings. The second chart under the calculator shows these totals for your own inputs.
How do you build a rent vs buy comparison in Excel or Google Sheets?
Use one row per year and two blocks of columns. For the buyer: home value (the price times (1 + growth)^year), loan balance, yearly mortgage payments (the monthly payment times 12), and running costs as a percentage of the value. For the renter: the rent for that year, rising by the rent growth rate, and the investment pot, which is last year's pot times (1 + return) plus this year's saving. The buyer's net position is value x (1 - selling costs) - balance, plus any pot of the buyer's own.
A yearly sheet will not match this page to the dollar, because the calculator adds savings and charges interest every month. The method is the same, and the year-by-year table under the calculator gives you figures to check a spreadsheet against.
Property taxes, council tax and service charges: what to enter where
Only count a cost on the buying side when a renter in the same home would not pay it. Property tax is a good example of how this changes by country:
- US: where property tax is charged to the owner, enter your area's rate as a percentage of the home's value. HOA fees go in other owner costs.
- UK: GOV.UK's Council Tax guidance bases the bill on the adults who live in a home, so it is a cost of living there either way. Enter 0 for property tax. Purchase taxes and legal fees belong in buying costs; buildings insurance, service charges and ground rent go in other owner costs.
- Gulf, Singapore and Australia: registration or transfer fees and stamp duty on purchase go in buying costs, and building service charges or strata levies go in other owner costs.
Rates and fees differ by city and change over time, so the calculator holds no country figures. Enter the ones that apply to the home you are looking at.
Common mistakes and what this calculator leaves out
- Comparing rent with the mortgage payment alone. Running costs added $766.67 a month in the default example, and principal is not a cost at all.
- Forgetting the renter's starting cash. The down payment and buying costs would earn something if they were not spent on a home.
- Leaving out selling costs. The buyer's equity is only spendable after the sale.
- Testing one set of growth rates. The table above shows how far a couple of points move the result.
The calculator does not model tax on investment returns, tax reliefs on mortgage interest, capital gains tax on a sale, rent deposits, moving costs, mortgage insurance, refinancing, or rate changes during the term. It assumes both households really do invest every spare dollar at the rate entered, which takes discipline in practice. Investment returns vary from year to year and can be negative, and home prices can fall.
Glossary
Net position: what a household would hold at that date: for the buyer, home equity after selling costs plus any invested savings; for the renter, the investment pot. Crossover year: the first year-end at which buying's net position is at or above renting's. Equity: the home's value less the loan still owed. Buying costs: fees and taxes paid to complete a purchase. Selling costs: agent and legal fees on a sale. Running costs: maintenance, property tax and other owner costs. Opportunity cost: what money spent on one thing could have earned elsewhere.
Frequently asked questions
Is it better to rent or buy a house?
It depends on how long you stay, the rent compared with the costs of owning, and how fast home prices, rents and investments grow. On this page's default inputs, renting is ahead for 12 years and buying is ahead from year 13. The calculator shows both net positions for your own inputs rather than giving a single answer.
How do you calculate rent vs buy?
Give both paths the same starting cash and the same monthly budget. The buyer's net position is the home's value less selling costs and the loan balance, plus any savings; the renter's is the starting cash and the monthly savings, invested. Compare the two at each year-end.
What is the break-even point between renting and buying?
It is the first year in which buying's net position catches up with renting's, called the crossover year here. On a $400,000 home with 20% down at 6.5% and $2,000 rent, with 3% growth in prices and rent and 5% on investments, it is year 13.
Why does the renter invest the down payment?
Because the buyer spends that money on the home, the renter has it available to invest. Leaving it out would compare a buyer's equity with a renter who holds nothing, which overstates buying.
Does the calculator include the mortgage principal as a cost?
No. Principal repayments reduce the loan and come back as equity when the home is sold. The calculator counts them in the monthly outgoings but not as money lost.
What return should I use for the renter's investments?
Use a rate that matches where the money would really go, such as a savings rate for cash or a long-run assumption for a fund, and test a range. On the default inputs, moving it from 5% to 7% turns a $20,974 lead for buying into a $70,993 lead for renting.
How long do you need to own a home for buying to come out ahead?
Long enough to recover the buying and selling costs, which put the buyer $36,000 behind on day one in the default example. With faster home price growth the wait shortens: at 5% a year the crossover comes in year 4.
Can I use the rent vs buy calculator in pounds or dirhams?
Yes. Choose GBP, AED or any of the 24 currencies, and amounts are formatted for it without conversion. A £300,000 home with 10% down against £1,300 rent reaches its crossover in year 3 on the example inputs on this page.
Does the calculator include tax?
No. Tax on investment returns, mortgage interest relief and tax on the sale of a home all depend on where you live and are left out. Purchase taxes such as stamp duty can be entered as part of the buying costs.
Why does the lead sometimes change more than once?
When growth rates are close, rising rent can help the buyer while a high investment return keeps helping the renter, so the lines can cross and cross back. The calculator flags this and the yearly table shows every year.
Courses at NIFM Academy
All NIFM Academy courses
The full NIFM Academy catalogue: ACCA exam preparation and stock market, forex and crypto trading courses.
See what the course coversUS, UK and Europe stock market courses
Stock market courses for the US, UK and European markets, from first trades to professional analysis.
See what the course coversFree course videos
Free course videos from NIFM Academy that you can watch before choosing a course.
See what the course coversSources and review
Last reviewed 14 November 2026 by the NIFM Academy editorial team. Next review by 14 November 2027.
- Rent versus buy net-position method, equal starting cash and equal monthly budgets, with the cheaper path investing the difference; monthly amortization M = L x i x (1 + i)^n / ((1 + i)^n - 1), reproduced in the working under every result. Checked 14 November 2026.
- GOV.UK, Council Tax: who has to pay, you'll usually pay Council Tax if you're 18 or over; a full bill is based on at least 2 adults living in a home. Checked 14 November 2026.