Rent vs Buy Calculator
Last updated: 27 June 2026
Reviewed by Gavin Meiring, Lead research and primary author · Doctoral Candidate (Corporate Governance) · Research and drafting assisted by AI
- The '5% rule' used in rent-versus-buy comparisons says owning typically costs about 5% of a home's value per year in unrecoverable costs — maintenance, taxes, insurance and the lost return on the deposit.
- Britain's first rent controls were introduced during the First World War, when the 1915 Rent Act capped rents after Glasgow shipyard workers went on strike over profiteering landlords.
- The word 'rent' derives from the Latin 'reddita', meaning 'things paid back' — the regular payments returned to the owner of the property.
Rent vs Buy Calculator
A rent vs buy calculator compares the long-term financial outcome of renting a home against buying one, helping you decide which option makes more sense given your circumstances. It is used by prospective buyers, renters, and financial planners who want to go beyond the emotional pull of homeownership and analyse the actual numbers.
How to Use the Rent vs Buy Calculator
- Enter the property purchase price, your deposit, mortgage rate, and term.
- Enter all buying costs including stamp duty, legal fees, survey, and ongoing costs such as maintenance and insurance.
- Enter the monthly rent for a comparable property and any annual rent increases.
- Enter the expected property price growth rate and the investment return rate you could achieve by investing your deposit instead.
- The calculator projects the net wealth under both scenarios over your chosen time horizon and shows which is ahead at each point.
The Formula
Buying wealth = Property Value at Year n - Outstanding Mortgage at Year n - Total Costs Paid
Renting wealth = Deposit Invested at Return Rate over n years + (Rent Saved vs Mortgage) Invested - Total Rent Paid
The comparison is valid when you account for the opportunity cost of the deposit, the equity built through mortgage repayments, the cost of ownership, and the return you could earn by investing rather than buying.
Real-World Example
Property price: £300,000. Deposit: £60,000 (20%). Mortgage: £240,000 at 4.5% over 25 years. Monthly payment: £1,333. Equivalent rent: £1,200 per month.
Upfront buying costs (stamp duty, legal, survey): £9,500.
Year 1 buying costs compared to renting: you pay £133 more per month in mortgage vs rent, plus you deploy £60,000 in deposit capital.
If property grows at 3% annually, after 10 years the property is worth £403,000. Your outstanding mortgage balance is approximately £178,000. Buying equity = £225,000.
If you had rented and invested the £60,000 deposit at 6% per year, it grows to £107,000. You also save £133/month, which invested at 6% grows to approximately £21,700. Total renting wealth from investment = £128,700.
In this example, buying produces greater wealth after 10 years. However, at shorter horizons or with higher transaction costs, renting often wins.
When Renting Makes More Financial Sense
Buying is not always superior. Renting can be better when property prices are high relative to rents, when you need flexibility to move in the short term, when you can invest the deposit at returns exceeding the property's capital growth rate, or when buying costs are very high relative to the holding period. The rent-to-buy ratio, which compares annual rent to property price, is a useful shorthand. When annual rent is less than 4-5% of the purchase price, renting is often more competitive. Location matters enormously, as the comparison varies dramatically between cities and neighbourhoods.
Frequently Asked Questions
How long do I need to stay to make buying worthwhile? The break-even holding period depends on transaction costs and the relative performance of the property versus invested alternatives. In most UK markets, you typically need to hold a property for at least 4-7 years to recover stamp duty, legal fees, and moving costs through equity growth.
Should I include capital gains tax in the comparison? If you are a homeowner selling your primary residence, the gain is exempt from CGT. If you are investing the deposit in stocks or funds, gains may be subject to CGT on disposal. This tax difference generally favours homeownership from a tax perspective.
What return rate should I assume for invested savings? A diversified equity portfolio has historically returned 7-10% annually over long periods. Using 5-6% net of costs and inflation is a more conservative planning assumption. The gap between your assumed investment return and property capital growth rate is the key driver of the rent-vs-buy outcome.
Does renting mean I am throwing money away? No. Rent pays for a place to live. Mortgage interest, maintenance, insurance, and transaction costs are also forms of money spent without building equity. The rent vs buy comparison must account for all costs on both sides, not just mortgage repayments vs rent.
Building the comparison one year at a time
Two balances are being compared, not two budgets. The buying side carries the property value less the mortgage balance less the upfront costs of £9,500. The renting side carries the £60,000 deposit invested at 6% plus the £133 a month difference between the mortgage and the rent, also invested at 6%. Rent and the cost of owning the property are the price of living somewhere, so they sit outside the comparison rather than on one side of it.
| Year | Buying capital | Renting capital | Difference |
|---|---|---|---|
| 1 | £64,817 | £65,241 | minus £424 |
| 2 | £79,648 | £70,798 | £8,849 |
| 3 | £95,012 | £76,693 | £18,320 |
| 5 | £127,423 | £89,573 | £37,850 |
| 7 | £162,220 | £104,060 | £58,160 |
| 10 | £219,295 | £129,247 | £90,048 |
| 15 | £329,174 | £182,472 | £146,701 |
At year 10 the buying column is £403,175 of property value less a £174,380 mortgage balance less £9,500 of costs. The renting column is £107,451 of invested deposit plus £21,796 of invested monthly difference, which is the £128,700 the worked example above reports. Both columns are capital. Neither includes the £14,400 a year of rent on one side or the £3,000 a year of ownership costs at 1% of value on the other, because those are consumption whichever route you take.
Where the two lines cross
On these assumptions the buying line overtakes the renting line inside the second year. It is close at year 1, where the buyer is £424 behind after the costs of purchase, and clear by year 2, where the buyer is £8,849 ahead. From there the gap widens by roughly £10,000 to £20,000 a year as the mortgage balance falls and the property grows.
The FAQ above gives four to seven years to recover stamp duty, legal fees and moving costs in most UK markets. That is a narrower question than the one in the table, and the two are consistent once the difference is stated. The four-to-seven-year figure asks how long equity growth alone takes to earn back the transaction costs. The table asks which side holds more capital at the end of each year, and it credits the renter with the invested deposit and the invested monthly difference. A reader who wants to know when the costs of buying are repaid should use the narrower figure.
Growth against return, ten years out
The comparison has two moving parts, and the outcome depends on which one is larger. Each cell below is the buying capital less the renting capital at year 10, in pounds.
| Property growth | 4% return | 5% return | 6% return | 7% return | 8% return |
|---|---|---|---|---|---|
| 1% a year | £39,107 | £29,120 | £18,259 | £6,457 | minus £6,361 |
| 3% a year | £110,896 | £100,908 | £90,048 | £78,245 | £65,427 |
| 5% a year | £196,389 | £186,402 | £175,541 | £163,739 | £150,921 |
Buying wins everywhere except the top right corner, where a property growing at 1% a year loses to a portfolio returning 8%. That single negative cell is the whole argument for running the numbers rather than assuming: the property growth rate and the investment return rate are what decide the answer, and a two percentage point swing in either one moves the year-10 gap by tens of thousands of pounds.
The table also shows how little the choice matters in the middle. Between 4% and 6% returns at 3% property growth, the gap moves from £110,896 to £90,048. Between 1% and 5% property growth at a 6% return, it moves from £18,259 to £175,541. The property growth assumption does more work than the investment assumption over this horizon.
What the comparison leaves out
Five costs sit outside the model and each one moves the answer towards renting. The first is the ownership cost of the property: repairs, decoration, boiler replacement, roof work and the insurance that goes with them. At 1% of value a year on a £300,000 property that is £3,000 a year, or £250 a month, and it is a real cash outflow that the buying column does not carry. The second is the transaction cost of selling, which on the next move takes estate agency fees and legal costs out of the equity. The third is the change of tenure: the model assumes you stay for the full period, and a move inside the break-even period turns a well-run comparison into a loss.
The fourth is that rent is not fixed. The model holds rent at £1,200 a month for ten years, and rents in the UK rose 3.3% in the 12 months to May 2026. Rent that rises with inflation while the mortgage payment stays level narrows the renting advantage over time, and it is the mortgage payment that is the fixed one. The fifth is that a mortgage payment is a commitment with a date, and a rent payment is a commitment with a break clause. Flexibility has a price, and the comparison does not quote it.
Reading the house price series from the ONS
The Office for National Statistics publishes the UK House Price Index and the Price Index of Private Rents together in the Private rent and house prices release. In the release covering the 12 months to April 2026, the average UK house price was £270,000, up 3.8%, and the average UK private rent was £1,383 a month, up 3.3% in the 12 months to May 2026. In England the average price was £291,000, up 3.9%.
The same release records why the annual house price growth rate moved so sharply that month. Prices rose 0.7% between March and April 2026 and had fallen 2.9% a year earlier, when Stamp Duty Land Tax changed in England and Northern Ireland on 1 April 2025. An annual rate built on a large fall a year ago is a base effect, and it is not evidence that prices accelerated. A 3% growth assumption is a reasonable planning figure, and the published series is where to check it before committing to a purchase.
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