Rent vs Buy Assumptions Guide

Use this calculator if...

The rent-vs-buy calculator is useful when the question is comparative, not just monthly payment size.

• You want to compare scenarios over time Use it when the question is how renting and buying might compare over a chosen holding period.
• You can estimate both sides It works best when you have rent, home price, mortgage, ownership cost and growth assumptions.
• You want assumptions visible The result is only useful when costs, growth and opportunity cost assumptions are easy to inspect.

Input assumptions explained

These assumptions are the ones most likely to move the comparison.

• Holding period Short periods make buying and selling costs more important. Longer periods give growth assumptions more time.
• Rent and rent growth Rent affects the renting scenario each year, and rent growth compounds over the comparison period.
• Purchase price and deposit These set the mortgage size and the cash tied up in the buying scenario.
• Ownership costs Maintenance, insurance, rates, taxes and shared-property fees can narrow the gap between payment and rent.
• Property growth Estimated future sale value can strongly move the buying scenario.
• Opportunity cost Cash used for a deposit, closing costs or ownership costs could have been used elsewhere in the renting scenario.

Worked example

If buying needs 100,000 upfront and renting needs much less upfront, the renting scenario can estimate growth on unused cash while the buying scenario estimates equity after costs.

Upfront cash to buy

100,000

Deposit and purchase costs are cash that could have another use in the renting scenario.

Holding period

5 years

The period determines how long costs and growth assumptions compound.

Rent growth

3% per year

Rent increases can make the renting scenario more expensive over time.

Property growth

3% per year

Property growth changes the estimated sale value before selling costs.

Ownership costs

Ongoing

Maintenance, fees and insurance reduce the buying scenario’s net position.

Investment return

Scenario input

Used to estimate opportunity cost for cash not used to buy.

Small annual changes in rent growth, property growth or investment return can become large differences by the end of the holding period.

Result interpretation

Read the result as a scenario based on the assumptions entered, not as a decision rule.

Common mistakes

These are common ways an estimate can become cleaner than the real-world scenario.

• Ignoring transaction costs Buying and selling costs can matter a lot, especially over shorter holding periods.
• Leaving maintenance out Ownership costs can make the buying scenario look cleaner than it is.
• Using one growth assumption as a prediction Rent growth, property growth and investment return are scenario inputs, not forecasts.
• Comparing monthly payment with rent only A rent-vs-buy estimate also needs deposit, fees, sale costs, maintenance and opportunity cost.

Related calculators

Use these calculators to check the mortgage, savings and growth assumptions that feed the comparison.

What to try next

Use the next step that matches the question you want to answer.