Rent or buy calculator
Your data
Taxes, upkeep and building fees go together in one line, as a share of the price per year: one and a half percent is a common starting point, not a rule.
Results
Rise in price that makes the two even
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| What you would have if you buy | — |
| What you would have if you rent and invest | — |
| Difference at the end | — |
| Loan instalment | — |
Renting here is not spending the difference: whatever the owner pays above the rent is invested at the return you typed, and whatever the tenant pays above it comes out of the same pot. Without that the comparison would be between one person who saves and another who does not, which answers nothing.
Why does it not simply say whether to buy?
Because the answer turns on two figures nobody knows: how much the property will rise and how much the money will earn. A calculator that answers buy is hiding a guess inside a sum.
What can be worked out without guessing is the boundary: the yearly rise in price at which both paths end with the same wealth. Above it buying wins, below it renting wins, and whether that figure is believable is the reader's call.
Is the tenant assumed to save the difference?
Yes, and without that the comparison answers nothing. Both sides put out the same money each month: the down payment starts invested, and whatever the owner pays beyond the rent is invested at the return you typed.
When the rent climbs past the owner's outlay, which happens in later years, the difference turns negative and comes out of the same pot. Comparing an owner who pays down a loan with a tenant who spends the difference is comparing saving with not saving, not renting with buying.
Why is the wealth of the owner the price minus the debt?
Because that is what would be left after selling and settling the loan. Early on it is small: the first instalments are almost all interest, so the debt barely moves while the money is gone.
That is why a short stay favours renting even when the property is rising. The costs of owning are paid from month one, and the equity arrives late.
Where do the yearly rates become monthly?
By the twelfth root, never by dividing by twelve. Ten percent a year is 0.7974 percent a month, and dividing would say 0.8333.
The gap looks tiny and is not: over a thirty year loan it moves both sides of the comparison in the same direction, which is exactly the sort of error that leaves the verdict looking right for the wrong reason.
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