Renting and buying both cost money. The real question is which costs less over the years you expect to stay. This calculator puts both on the same footing: every pound that leaves your pocket, minus whatever you walk away with at the end.
What the calculator counts
Buying. You pay the deposit and buying costs up front, then a monthly repayment mortgage and an allowance for maintenance each year. At the end of the period the calculator assumes you sell. The home is valued at your growth rate, and selling costs and the remaining mortgage come off. What is left is your equity, and that is taken off the cost of buying.
Renting. You pay rent, which rises each year by your rent growth figure. You do not spend the deposit or buying costs, so the calculator assumes you invest them at the return you choose. The gain on that money is taken off the rent.
The option with the lower net cost is cheaper. The breakeven year is the first year buying comes out ahead.
A worked example
Take a £300,000 home bought with a 10% deposit (£30,000), £5,000 of buying costs and a 25-year repayment mortgage at 5%. The alternative is renting a similar home for £1,300 a month. House prices and rents both rise 3% a year, maintenance costs 1% of the price each year, selling costs are 2%, and the renter earns 4% a year on the £35,000 they did not spend.
| Over 10 years | Buying | Renting |
|---|
| Monthly cost at the start | £1,578 mortgage | £1,300 rent |
| Cash paid out | £254,407 (upfront, mortgage and maintenance) | £178,837 rent |
| What you keep | £195,515 equity after selling costs | £16,809 investment gain |
| Net cost | £58,892 | £162,028 |
On these figures buying is £103,136 cheaper over 10 years, and it pulls ahead in year 2. Most of the gap comes from price growth. 3% a year adds £103,175 to a home you only put £35,000 into.
Now set house price growth to 0%. Buying then costs £160,003 and renting £162,028, only £2,025 apart. Small changes to the inputs move the answer a long way, so test the ones you are least sure of.
What each input means
- Deposit. A bigger deposit means a smaller loan and less interest. It also ties up more cash that could have been invested.
- Mortgage rate and term. The calculator uses a capital and interest mortgage at one rate for the whole term. Real deals fix for a few years and then move, so try a rate a point or two higher as well.
- Buying costs. Stamp duty, legal fees and a survey. On this £300,000 example, Stamp Duty Land Tax is £5,000 for a home mover and £0 for a first-time buyer. The stamp duty calculator works it out for any price.
- Selling costs. Estate agent and legal fees when you sell, as a percentage of the sale price.
- House price and rent growth. Long-run averages hide long flat spells. Different rent indices also disagree, as our look at why UK rent figures differ explains, so try a range.
- Maintenance. Owners pay for the boiler, the roof and everything in between. Renters do not. Older homes usually need more than newer ones.
- Investment return. What the renter earns on the money they did not spend on a deposit. Be realistic, and remember that returns go down as well as up.
- Comparison period. How long you expect to stay before selling. This matters more than most people expect.
UK rules that affect the answer
Stamp duty for first-time buyers. In England and Northern Ireland, first-time buyers pay no Stamp Duty Land Tax on the first £300,000 and 5% on the part from £300,001 to £500,000. Above £500,000 the relief is lost entirely. Scotland charges LBTT and Wales charges LTT, each with its own bands.
No capital gains tax on your home. Private Residence Relief normally means you pay no capital gains tax when you sell the home you live in, which is why the calculator does not tax the buyer's gain. The renter's investments are different. Gains above the £3,000 annual allowance can be taxed unless they sit in an ISA. The capital gains tax calculator shows how much.
Common mistakes
- Comparing rent with the mortgage payment alone. Part of each repayment is capital you get back as equity. Meanwhile the payment leaves out maintenance, insurance and the cost of buying and selling.
- Calling rent "dead money" but not interest. Mortgage interest, maintenance and buying costs are not recovered either. The calculator counts all of them.
- Testing a short stay at long-run assumptions. If you might move within a few years, set the period to match. Buying and selling costs take time to earn back.
- Ignoring the money a renter keeps. £35,000 of deposit and buying costs left invested is part of the comparison.
Two simplifications are worth knowing. The calculator invests only the upfront cash. It does not invest any monthly difference between renting and owning. It also leaves out tax on the renter's investment returns. Both are small next to the house price assumption, but they are there.
Thinking of letting a home you already own rather than selling it? Our guide to deciding whether to hold or sell covers the numbers that matter.
This guide is for information only and is not financial, tax or mortgage advice. Rates, allowances and lender criteria change, so check current figures on GOV.UK or with your lender, and take independent advice before you act.
