What the comparison actually includes
Most rent-versus-buy arguments compare a mortgage payment to a rent payment, which is not a comparison at all. This model tracks both sides properly.
If you buy: you pay the deposit and purchase costs upfront, then the mortgage plus ownership costs each month. Your net worth at the end is the appreciated property value, minus selling costs, minus the remaining loan balance.
If you rent: you start by investing the deposit and purchase costs — money the buyer has committed and you have not. Each month, whoever pays less invests the difference. Your net worth is that portfolio.
Both sides can invest, because in the early years the buyer's monthly outlay is usually higher, but as rent rises with inflation and the mortgage payment does not, that reverses. Modelling only one direction stacks the result.
The costs that decide it
Three inputs move the answer more than the rest, and all three are commonly omitted from casual comparisons.
Purchase costs. Stamp duty, registration and legal fees typically run 3–8% of the price depending on the country. This is money that vanishes on day one and never returns.
Selling costs. Agent commission and fees take another 2–6% on exit. Together with purchase costs, you need meaningful appreciation just to break even on the transaction itself.
Ongoing ownership costs. Property tax, insurance and maintenance run to roughly 1–3% of value a year. A renter pays none of these directly, which is the honest counterweight to "rent is dead money."
Time horizon usually decides it
Buying carries a large upfront cost that is recovered gradually. That produces a break-even point — the year at which buying overtakes renting — shown above.
Below roughly five years, renting usually wins, because transaction costs have not been recovered. Beyond ten, buying usually wins, as the loan amortises and rent keeps rising against a fixed payment. In between it depends on your specific numbers, which is the whole reason for running it.
Which makes the practical question not "should I buy?" but "how long will I stay?" If the honest answer is three years, the arithmetic is fairly clear.
Assumptions to be suspicious of
Property appreciation. The single most influential input and the one most casually assumed. Property does not appreciate reliably everywhere or in every period. Run it at 0% to see whether your case survives a flat market — if buying only wins at 8% appreciation, you are betting on the market, not buying a home.
Investment return. The renter's advantage depends entirely on actually investing the difference. Most renters do not, which is a genuine argument for buying: a mortgage is forced saving that a rental agreement is not.
Rent growth. Rent rises over decades; a fixed mortgage payment does not. Over a long horizon this is one of the strongest arguments for owning.
What no calculator can price
Security of tenure, freedom to renovate, and not being asked to leave at the end of a term have real value that varies enormously by person and by country. So does mobility: owning makes moving for a better job slow and expensive.
Treat the output as the financial half of the decision. If the numbers are close, the non-financial factors should decide it — and if they are not close, they should at least be weighed knowingly.
Frequently asked questions
Is it better to rent or buy?
It depends mostly on how long you will stay. Below roughly five years renting usually wins because purchase and selling costs have not been recovered. Beyond ten years buying usually wins, as the loan amortises and rent rises against a fixed payment.
What costs do people forget when comparing rent and buy?
Purchase costs of 3-8%, selling costs of 2-6%, and ongoing ownership costs of 1-3% of value a year for tax, insurance and maintenance. Together these mean you need meaningful appreciation just to break even on the transaction.
Does the calculator assume the renter invests the difference?
Yes, and that assumption matters. The renter starts by investing the deposit and purchase costs, then invests any monthly saving. Most real renters do not do this, which is a genuine argument for buying - a mortgage is forced saving.
What appreciation rate should I assume?
Try 0% first. If buying only wins at high appreciation rates, you are making a bet on the property market rather than a housing decision. Property does not appreciate reliably in every location or period.