Rent or buy — and the year it flips
Buying beats renting once the equity you build plus house price growth outweighs the return the same money would have earned invested — which depends on how long you stay, and typically takes well over a decade at ordinary appreciation and investment returns.
Worked example: with House price of 400,000, this model computes Buying pulls ahead in year 16. See the full breakdown.
✓ 3 self-test cases · assumptions shown No rates to go out of date · reviewed 2026-08-02
How rent vs buy is worked out
Almost every rent-vs-buy calculator on the web quietly rigs the answer, and it does so the same way: it compares a mortgage payment with a rent payment and declares buying the winner because you build equity. That comparison omits the biggest factor on the renting side — the deposit and buying costs are not spent when you rent, and that money earns a return.
This model tracks net worth on both paths. The buyer’s is the house value, minus the mortgage still owed, minus what it would cost to sell. The renter’s is a portfolio seeded with the deposit and buying costs, growing at the investment return you choose, plus the difference between the two paths’ cash outlay every year. Where those two lines cross is the breakeven year.
Two inputs decide the answer and both are guesses: house price growth and the investment return. They are sliders rather than hidden constants on purpose. Move house growth above the investment return and buying wins almost immediately; move it below and renting can stay ahead for decades. A calculator that fixes those numbers for you has decided the answer before you arrived.
Worked example
| House price | 400000 |
|---|---|
| Deposit (%) | 20 |
| Mortgage rate (%) | 6.5 |
| Rent / month | 2200 |
| House price growth per year (%) | 3 |
| Investment return the renter earns (%) | 7 |
| Years you stay | 20 |
| Deposit ✓ | 80000 |
| Closing Costs ✓ | 12000 |
| Monthly Rate | 0.005416666666666667 |
| Loan Amount ✓ | 320000 |
| Compound Factor | 6.991797973867253 |
| Monthly Payment ✓ | 2022.62 |
| Total cost of owning ✓ | 593268.83 |
| Total rent paid ✓ | 713377.88 |
| Buying pulls ahead in year ✓ | 16 |
| Net worth difference ✓ | 30032.35 |
| Favours Buying ✓ | true |
Every row is computed by the engine from the inputs above. Rows marked ✓ are additionally pinned by a published self-test vector.
Frequently asked questions
Is it better to rent or buy?
It depends almost entirely on how long you stay and on two assumptions: house price growth and what the renter earns investing the difference. At 3% appreciation against a 7% investment return, buying a 400,000 home with 20% down does not overtake renting until around year 16 — but at 4% appreciation and a 6% return it takes about 6.
What is the breakeven year?
The first year the buyer’s net worth — house value minus mortgage minus selling costs — passes the renter’s invested portfolio. Before it, selling up would leave you behind; after it, ahead. The model reports 0 when it never happens inside the years you enter.
Why does the renter invest the difference?
Because otherwise the comparison is not between two strategies but between saving and spending. The deposit and buying costs are real money the renter still has, and in most years the cost of owning exceeds the rent. Leaving that out is the most common error in rent-vs-buy calculators, and it usually flips the verdict.
Does buying always win in the end?
No. It wins when appreciation plus the forced saving of paying down a mortgage beats the return on the money renting frees up. If investment returns comfortably exceed house price growth, renting and investing can stay ahead indefinitely — which is why both rates are inputs here rather than fixed.
Sources
Projection, not advice. The badge means the engine reproduces this model's own arithmetic through 3 self-test cases. It says nothing about whether the assumptions above will hold — nobody can verify a forecast. What this page offers instead is that every assumption is visible, editable, and traceable to the figure it moves.
Check the arithmetic yourself: how this calculator is verified — the formula behind every derived value, the 3 test cases the engine reproduces, and what the badge does and does not claim. Also available as machine-readable JSON.
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