Rent vs Buy Calculator
Net cost of owning (mortgage, tax, maintenance, buying and selling costs, minus equity on sale) against renting (rent growth, minus returns on the invested deposit), year by year, with the break-even year.
Renting
Buying
| Monthly mortgage payment | — |
|---|---|
| Owning: total cash out over the period | — |
| Owning: equity returned on sale | — |
| Owning: net cost | — |
| Renting: total rent and insurance | — |
| Renting: investment of deposit + monthly differences | — |
| Renting: net cost | — |
| Break-even | — |
Net cost by year (lower is better)
In short
Compare net costs over the years you will stay: owning = deposit, buying costs, mortgage, tax, maintenance and insurance minus the equity returned on sale after selling costs; renting = rent (rising yearly) minus the return earned on the deposit and monthly differences invested. Under about five years renting usually wins because buying and selling costs are not yet recovered.
Who this is for: Tenants and first-time buyers in any market deciding whether to keep renting.
What the comparison counts
- Owning: deposit and buying costs up front, then mortgage payments, property tax or service charges, maintenance (1% of value a year is the usual allowance) and insurance. At the end you sell: value grown at the appreciation rate, minus selling costs and the remaining loan — that equity comes back to you.
- Renting: rent rising each year, plus renter's insurance. The deposit and buying costs you did not spend are invested, and so is every month the owner pays more than you — at the investment return. Those gains offset the rent.
- Net cost = cash out − what you get back. The lower net cost wins; the year it flips is the break-even.
- The answer swings most on how long you stay (buying costs are spread over the years), appreciation vs investment return, and the price-to-rent ratio: price ÷ annual rent above about 20 tends to favour renting, below 15 favours buying.
- Works for any market — set buying costs to your country's transfer tax and fees (Dubai 4% DLD + agent, UK stamp duty, US closing costs) and property tax to the local annual charge.
See also: UK Mortgage Affordability Calculator.
Assumptions
- Owning per year: mortgage interest + principal, property tax and maintenance as % of the current value, insurance/HOA; home value and rent grow at their annual rates.
- Equity on sale = value × (1 − selling costs) − remaining mortgage; owning net cost = all cash out − equity.
- Renting: deposit and buying costs invested at the return rate, plus each year's difference between owning and renting outlays; renting net cost = rent paid − investment gains.
Worked example
Mortgage 2,275 a month. Over 7 years the owner spends about 380,000 (deposit, 13,500 buying costs, mortgage, tax, maintenance, insurance) and gets back roughly 200,000 in equity after 5% selling costs — net cost 180,000. The renter pays 202,000 in rent but earns about 55,000 on the invested deposit and the monthly difference — net cost 147,000. Renting is ahead by about 33,000; on these inputs buying only overtakes in year 15. Drop the rate to 5% or raise appreciation to 4.5% and the answer flips — which is the point of running your own numbers.
Frequently asked questions
Is it better to rent or buy?
It depends on how long you stay, local price-to-rent ratios and what your deposit could earn elsewhere. Under about five years renting usually wins because buying and selling costs are not yet recovered.
Does the calculator include tax relief on mortgage interest?
No — it exists in some countries (the US, the Netherlands) and not others; if it applies to you, reduce the mortgage rate slightly to approximate it.
Why does the renter earn investment gains?
Because a fair comparison gives the renter the same money the buyer spends — the deposit and any higher monthly outlay — and assumes it is invested, not spent.
Can I use this for Dubai or Riyadh?
Yes — set buying costs to about 6–7% (DLD fee, agent, mortgage registration), property tax to the annual service charge as a % of value, and appreciation to your view of the market. A Dubai-specific version with AED defaults is linked below.
How many years do I need to stay for buying to pay off?
Typically 5–8 years in a balanced market; the break-even line shows your own figure.
What price-to-rent ratio favours renting?
Price ÷ annual rent above about 20 tends to favour renting; below 15, buying.
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