How the comparison works
A fair comparison starts both people with the same money. The buyer spends it on a deposit, Stamp Duty and fees. The renter invests it instead. Each month, whoever has the lower housing cost invests the difference.
At the end of the period the calculator compares:
- the buyer's wealth: the home's value, minus the mortgage still owed and the cost of selling, plus any savings; and
- the renter's wealth: the invested deposit and costs, plus everything saved along the way, with growth.
Whichever is larger came out ahead. Comparing monthly payments alone misses most of what matters.
The costs of buying
- Upfront: deposit, Stamp Duty (or LBTT or LTT), legal fees, survey and mortgage fees.
- Monthly: mortgage payments, part interest and part capital.
- Upkeep: repairs, maintenance and buildings insurance, often around 1% of the home's value a year.
- Leasehold costs: service charge and ground rent for many flats.
- Selling: estate agent and legal fees when you move on, often 1% to 2% of the value.
Only the interest, upkeep and transaction costs are truly spent. The capital part of each payment builds your equity.
The costs of renting
- Rent, usually rising each year.
- A deposit, which is returned at the end if there is no damage, so it is not a cost.
- Contents insurance. The landlord pays for buildings insurance and most repairs.
- Moving costs if the landlord sells or you are asked to leave.
Rent buys no equity, but the renter's savings can be invested and grow.
A worked example
A first-time buyer in England looks at a £300,000 home with a £30,000 deposit, or renting a similar home for £1,300 a month. The mortgage is 4.5% over 25 years. House prices and rents both rise 3% a year, investments return 5%, upkeep is 1% a year and selling costs 1.5%.
- Cash to buyDeposit plus £2,500 of fees; no Stamp Duty£32,500
- Mortgage payment£1,501 a month
- Owning cost in year oneMortgage plus upkeep£1,754 a month
- Home value after 10 years£403,175
- Mortgage still owed£196,178
- Buyer's wealth£200,949
- Renter's wealth£101,577
Even though owning costs more each month at first, the buyer comes out well ahead, mostly because 3% growth on a £300,000 home adds far more than 5% growth on the renter's £32,500.
How long you stay
Buying has large one-off costs at the start and the end. The longer you stay, the more those costs are spread out and the more equity you build.
| Years | Buyer's wealth | Renter's wealth | Buying ahead by |
|---|---|---|---|
| 3 | £71,682 | £54,006 | £17,676 |
| 5 | £105,349 | £68,105 | £37,244 |
| 10 | £200,949 | £101,577 | £99,372 |
| 20 | £470,396 | £168,342 | £302,054 |
With Stamp Duty to pay as a home mover, or lower price growth, the break-even point moves later. If you might move again within two or three years, renting is often the safer choice.
House prices
House price growth is the biggest single driver of the result:
Those are the amounts by which buying comes out ahead after 10 years. With no house price growth at all, buying only just wins in year 10, by £3,464. With prices falling, renting would win. Past growth is no guarantee: prices can stagnate for years, especially after rapid rises.
How high the rent is
The higher the rent compared with the price, the stronger the case for buying. A useful check is the price-to-rent ratio: the price divided by a year's rent.
| Rent a month | Price-to-rent ratio | Buying ahead by |
|---|---|---|
| £1,000 | 25 | £46,911 |
| £1,300 | 19 | £99,372 |
| £1,600 | 16 | £151,833 |
In areas where homes are expensive compared with rents, renting and investing looks relatively better. Where rents are high compared with prices, buying usually wins sooner.
Mortgage rates
Higher mortgage rates raise the cost of owning. At 6% instead of 4.5%, the payment on the example rises from £1,501 to £1,740 a month, and buying's lead after 10 years shrinks from £99,372 to £52,527. Most mortgages fix for two to five years, so the rate you pay later is uncertain.
Investment returns
The renter's side depends on what their money earns. At 7% a year instead of 5%, the renter's wealth rises to £118,749 after 10 years, cutting buying's lead to £82,201. In a cash savings account earning less, renting looks worse. Investments can also fall, especially over short periods.
Use an ISA
Investment growth inside an ISA is tax-free. Outside an ISA, tax on interest, dividends and gains would reduce the renter's returns. The calculator does not deduct tax.
Will the renter really invest?
The comparison assumes the renter invests every pound they do not spend on housing. In real life many people do not, and the money gets spent. A mortgage acts as forced saving: every payment builds equity whether you feel like saving or not.
If you are confident you would invest the difference consistently, renting can compete. If not, buying's advantage is usually larger than the figures suggest.
Beyond the money
- Security
- You decide when to move
- Freedom
- Decorate and improve as you like
- Risk
- Prices and rates can move against you
- Effort
- Repairs are your job
- Flexibility
- Easy to move for work or family
- Costs
- Landlord pays for most repairs
- Risk
- Rents can rise and you may have to move
- Control
- Limits on pets and changes
What the model leaves out
- Taxes on investment returns, and Capital Gains Tax on any second home. A main home is usually free of CGT.
- Changes in mortgage rate after a fixed deal ends.
- Leasehold costs such as service charges, unless you include them in upkeep.
- Big one-off repairs, such as a new roof.
- Inflation: all figures are in future pounds, not today's.
Use the calculator to test a range of assumptions rather than relying on one answer.
Wealth, not monthly cost
It is tempting to compare the mortgage payment with the rent. But a mortgage payment is partly saving: the capital part reduces your debt and builds equity. On the example, the first year's mortgage payments of about £18,000 include roughly £6,000 of capital. Rent buys no equity, but the renter keeps more cash to invest.
That is why the calculator compares wealth at the end of the period rather than costs. A higher monthly cost can still leave you better off if more of it is building something you own.
Other routes into owning
- Shared ownership lets you buy part of a home with a smaller deposit and pay rent on the rest. Our shared ownership calculator compares the costs.
- A Lifetime ISA adds a 25% bonus to savings of up to £4,000 a year towards a first home costing £450,000 or less.
- Family help, such as a gifted deposit or a joint borrower mortgage, can bring buying forward.
- Buying further out or a smaller home first can make buying worthwhile sooner, at the cost of commuting or space.
Building wealth as a renter
If renting suits you, the key is to invest the money you would otherwise have put into a home. A stocks and shares ISA lets up to £20,000 a year grow free of tax. Regular monthly investing smooths out market ups and downs, and workplace pension contributions get tax relief and often an employer match.
Over the long term, a renter who invests consistently can build substantial wealth. The risk is not investing at all, which is where buying's forced saving gives owners an edge.
How to use the calculator
- Enter the price and rent of two genuinely similar homes in the same area.
- Set the number of years you realistically expect to stay.
- Under More options, try cautious figures: 0% to 2% house price growth and a mortgage rate a point higher.
- Then try optimistic figures. If buying wins in both, it is a strong case; if the answer flips, it is a close call.
- Use the year-by-year table to see when buying pulls ahead.
Lower rents favour renting: at £1,000 a month on the example, buying still wins after 10 years, but only from year 2 and by less than half as much.
Example: when prices stand still
Take the same example but with no house price growth at all over 10 years. Rents still rise 3% a year and investments still return 5%.
- Home value£300,000
- Mortgage still owed£196,178
- Buyer's wealthAfter selling costs, plus savings£99,322
- Renter's wealth£95,858
The buyer only draws level in year 10, purely from paying down the mortgage while rents rise. If prices fell, or if the buyer had paid Stamp Duty as a home mover, renting would come out ahead.
When each choice tends to win
- Time
- You stay five years or more
- Rent
- Rents are high compared with prices
- Rates
- Mortgage rates are low
- Habits
- You would not invest spare cash
- Time
- You may move within a few years
- Prices
- Homes are expensive compared with rents
- Rates
- Mortgage rates are high
- Habits
- You invest the difference every month
Tax differences between owning and renting
Your main home is usually free of Capital Gains Tax when you sell it, thanks to Private Residence Relief. So the buyer's gain in the calculator is normally tax-free. The renter's investment returns are taxed unless they are held in an ISA or pension, or fall within the dividend and capital gains allowances.
On the other side, buyers pay Stamp Duty and renters do not. First-time buyers in England pay nothing on homes up to £300,000, which helps buying come out ahead sooner. A home mover buying the same £300,000 home would pay £5,000, which the calculator includes when you switch off first-time buyer under More options.