Part of our guide to How Much House Can You Actually Afford?
"Rent is throwing money away" compares the wrong things. Rent should be measured against mortgage interest, not against the whole payment — and once you do that, the answer depends almost entirely on how long you stay.
Total cost of each option over the years you plan to stay, counting only money that leaves and does not come back. The principal you repay is not a cost — it becomes equity. Interest, tax, insurance, upkeep and selling costs are.
What counts as a cost
This is where most comparisons go wrong.
Renting: every payment is gone. Escalated each year, since rents rise.
Buying: mortgage interest, property tax, insurance, maintenance and selling costs are gone. The principal is not — it converts cash into equity you recover at the sale. Appreciation is subtracted, because the property is worth more than you paid.
Comparing rent against the entire mortgage payment overstates the cost of buying, because a large part of that payment is you paying yourself.
How the calculation works
Rent is compounded annually at your escalation rate. Ownership is simulated month by month through a real amortisation schedule, so the interest figure reflects the actual split over the years you hold the property — heavily interest-weighted early, which is exactly the period a short stay covers.
Carrying costs escalate with the same inflation rate. At the end, the sale price is grown by your appreciation rate, selling costs are deducted, and the remaining loan balance is cleared.
What actually decides it
How long you stay. Buying carries large one-off costs at both ends — closing costs going in, agent fees and transfer taxes coming out. Over two years those dominate everything else. Over ten they fade. This single input changes the answer more often than any other.
The appreciation rate, which nobody knows. Run it optimistically and pessimistically. If buying only wins at a high appreciation rate, you are not comparing costs, you are making a bet — worth knowing before you sign.
The rate and the rent, in that order. A percentage point on the mortgage moves the interest total substantially.
What this leaves out
What the deposit could have earned elsewhere. Tying up a large sum has a real opportunity cost, and including it would require assuming an investment return — another guess stacked on the appreciation guess.
Flexibility. Renting lets you leave in a month. That is worth a great deal to some people and nothing to others, and it does not reduce to a number.
Security of tenure, maintenance you do yourself, and the difference between choosing when to move and being told to.
Treat the output as one input to the decision, not the decision.
Related tools and reading
- Rent vs buy — the arithmetic behind the argument
- Home affordability calculator
- Mortgage payment calculator
- What closing costs actually pay for
This is an estimate for general information, not financial advice — see our disclaimer.
Frequently asked questions
Why is the mortgage principal not counted as a cost?
Because it converts cash into equity rather than spending it. You get it back when you sell. Interest, tax, insurance, maintenance and selling costs do not come back, which is why only those are counted.
Why does how long I stay matter so much?
Buying has large one-off costs at both ends. Spread over two years they are crushing; over ten they are minor. The horizon usually decides the answer more than the rent or the rate does.
Is renting throwing money away?
No. Rent buys housing, exactly as mortgage interest does. The honest comparison is rent against interest plus tax plus upkeep plus transaction costs — not rent against the whole mortgage payment.
What appreciation rate should I use?
Nobody knows. Run it high and low and see whether the conclusion changes. If the case for buying only works at an optimistic rate, that is worth knowing before you commit.
What is not included?
The return you could have earned by investing the deposit instead, and the flexibility to move. Both are real, and neither reduces to a reliable number.
Sources
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