Buy vs Rent: Full Financial Analysis
Affordability, stress test, opportunity cost, and net worth at horizon — combined into one verdict.
How the full buy vs rent analysis works
A simple buy-vs-rent comparison often just looks at the monthly payment, but that misses the bigger picture — affordability, whether you can even get approved for the loan, how the payment holds up if rates rise, and what your money would be worth in each scenario years from now. This tool combines several individual analyses — maximum affordable property, price-to-income ratio, a mortgage rate stress test, and rental yield context — into one net-worth comparison at your chosen time horizon.
The net worth figures are the core output: buying's is home equity minus total cash paid out, renting's is the invested deposit plus any monthly savings from a cheaper rent, also invested. For a simpler single-scenario version without the affordability and stress-test layers, see the Rent vs Buy Calculator. To inspect the mortgage payment schedule on its own, see the Mortgage Calculator, and for the rental-yield market-context figures used here in more depth, see the Rental Yield Calculator.
Frequently asked questions
- Why might buying show a lower net worth even if the mortgage is cheaper than rent?
- netWorthAtHorizon compares home equity minus every dollar of cash paid out (deposit + all mortgage payments, including interest) against an invested deposit plus any monthly saving from renting being cheaper. It doesn't separately credit 'rent avoided' — a mortgage payment lower than rent still counts as cash paid out here, the same way /car-buy-vs-lease treats loan payments.
- What does the inflation context actually show?
- The CPI series only covers 2000–2025, so it can't forecast inflation forward. Instead it shows how much a rent-sized income eroded in real terms over a historical window the same length as your horizon, ending in 2025 — a rough proxy for the scale of inflation risk, not a prediction.
- What is the rental yield context for, if I'm buying to live in it?
- It's a market sanity check, not part of the net worth math: the price-to-rent ratio in particular is a classic rule of thumb (roughly above 20 tends to favor renting, below 15 tends to favor buying) you can compare against the verdict above.
- How is the buy vs rent comparison calculated?
- Buying's net worth is home equity built up (property value minus remaining mortgage balance) minus every dollar of cash paid out — deposit plus all mortgage payments including interest. Renting's net worth is the deposit invested at your assumed return rate, plus any monthly saving from rent being cheaper than the mortgage payment, also invested. The two are compared at your chosen horizon.
- What assumptions drive the break-even year?
- Mortgage rate, property appreciation rate, investment return rate, and the gap between rent and mortgage payment all drive when (or whether) buying's net worth overtakes renting and investing — small changes to appreciation or investment return assumptions can shift the break-even year substantially, so it's worth testing a range of reasonable assumptions rather than trusting a single scenario.
- How do transaction costs affect the comparison?
- This model does not separately itemise one-off buying costs (legal fees, transfer taxes, survey costs) or selling costs — they are implicitly part of the "cash paid out" side of buying if included in your inputs, but if you want to model them explicitly, add them to your deposit or property price figure before running the analysis.
- What happens to the comparison if house prices fall?
- A lower or negative property appreciation rate directly reduces buying's projected net worth at the horizon, since equity growth depends on the property gaining value on top of the mortgage being paid down — try lowering the appreciation assumption to stress-test how sensitive your verdict is to a weaker housing market.
- What is opportunity cost in the context of a deposit?
- It's the return you forgo by tying up your deposit in a home purchase instead of investing it — shown separately in the results as a reference figure, distinct from the full net-worth comparison, which already accounts for this by modelling the renting scenario as the deposit being invested instead.