Rent vs Buy Calculator

The wrong question, asked correctly

"Is renting throwing money away?" is the wrong question. Mortgage interest, maintenance, insurance, and transaction costs are also money that doesn't come back. The right question is: over a specific time horizon, which option leaves you with more net worth? This calculator answers that — but the answer depends heavily on inputs most people don't think about carefully.

The price-to-rent ratio: the first filter

Before running detailed math, check the local price-to-rent ratio. Take the property purchase price and divide by 12 times the monthly rent for an equivalent property. Ratios under 15 strongly favour buying; above 20 strongly favour renting; 15–20 is the grey zone where other factors dominate. in 2024 runs 25–35 for most flats — structurally buy-unfriendly territory. runs 8–12 — structurally buy-friendly. Running this simple ratio before the detailed calculation tells you whether the answer will be obvious or close.

The five costs people forget when buying

Mortgage payments are the obvious cost. Here's what gets left out:

Transaction costs. Buying costs 3–5% of the purchase price (Stamp Duty, legal, survey, mortgage arrangement). Selling costs another 1–3% (estate agent, legal, EPC). On a 350,000 property that's 14,000–28,000 total. If you move in under five years, these often exceed any equity built up.

Maintenance. A commonly cited figure is 1% of property value annually for running repairs, plus occasional large capital items (roof 10k, boiler 3k, kitchen 8k+). On a 350,000 home that's 3,500 average annually, with lumpy spikes every few years.

Opportunity cost of the deposit. A 70,000 deposit invested in a diversified portfolio at a historical 6% real return would grow to 125,000 over 10 years. That's the return the deposit money is not earning while it sits in the walls.

Insurance and protection. Buildings insurance, contents, sometimes mortgage protection or income protection. 400–800 annually.

Non-recoverable costs on resale. Property price changes don't guarantee gains. The UK nominal price index has risen 4–5% annually long-term, but that's before inflation (net ~2%), and individual properties can lag or lead the index by wide margins.

The two costs people forget when renting

Renting isn't cost-free either.

Rent inflation. The figure you enter is today's rent, but it goes up. Rents rose roughly 5–8% annually from 2022–2024. A 10-year projection using today's rent understates the total meaningfully. Sensible modelling uses an inflation-adjusted real rent figure or projects 3–4% annual rises.

Tenure uncertainty. Most tenancies are 6–12 months with no guarantee of renewal. Forced moves cost 1,500–3,000 each time (moving, new deposit, agent fees where still charged). Over 10 years of renting, 3–5 moves is typical — 5k–15k in friction costs that owner-occupiers don't face.

When renting actually wins

Despite the cultural pressure to buy, renting is the better financial decision in several scenarios: you expect to move within 5 years, you live in a high price-to-rent area (parts of), your career is likely to require geographic flexibility, you haven't yet maxed pension and tax-advantaged account contributions (better tax-advantaged returns than home equity), or the deposit would come from liquidating investments with tax consequences. Running this calculator with honest inputs often reveals that the emotional preference for buying doesn't survive contact with the spreadsheet.

When buying wins

Buying is usually the better call when: you plan to stay 7+ years, the price-to-rent ratio is under 20, you'd otherwise have a large deposit sitting in savings earning little, the property has genuine scope for improvement (the rare case where owner-added value exceeds the cost of the work), or your rental market is unstable with frequent forced moves. Emotional factors — security, personalisation, a place to put down roots — are real even though they don't appear in this calculator. Just make sure you know what you're paying for the emotional side.

The financial-flexibility argument

Owner-occupiers are wealthier on average, but often less liquid. A 500,000 home is not 500,000 in the bank; accessing it requires selling (costly, slow) or remortgaging (adds debt). Renters with comparable net worth typically have more of it in liquid investments, which means more options when circumstances change. Neither position is universally better — but the liquidity difference is worth understanding before committing to a decade of owner-occupation.

What this calculator doesn't capture

The tool models financial outcomes over your entered time horizon. It doesn't model the commute difference between areas you'd rent versus areas you'd buy, the quality-of-life gap between typical rentals and typical owner-occupied homes in your market, or the psychological value of security of tenure. Those can legitimately tip the decision either way. Use the financial number as one input into a broader judgment, not the whole answer.