Should you rent or buy?
Compare two ways of using the same starting funds and ongoing housing budget. Buying builds property equity but involves interest, ownership costs and transaction costs. Renting leaves the deposit available to invest, but does not build equity in the home you occupy.
The result compares projected net wealth after a hypothetical sale, not just rent against the mortgage payment. It does not decide which lifestyle is right for you or assess whether you qualify for a loan.
How to use the calculator
Enter a price and deposit for a home comparable to the property you would rent. Add buying costs separately, then enter the mortgage rate, term and weekly rent. Choose how many years you want to compare.
Open the assumptions section to adjust growth rates, ownership expenses and selling costs. Change one assumption at a time to see its effect. Calculate updates the comparison; Reset restores the illustrative example.
How the comparison keeps cash contributions equal
Both options start with the deposit plus upfront buying costs. The buyer spends this amount on the purchase. The renter invests it at the selected after-tax, after-fee return.
Each month, the lower-cost option invests the difference between the two housing outlays. If buying costs more, the renter invests the difference. If renting costs more, the buyer invests it. Both therefore use an equal total monthly budget, which is assumed affordable and is not income-tested.
Include the full cost of buying
Upfront costs should include your applicable transfer duty, conveyancing, inspections, registration and lender charges. These are entered manually: this page does not calculate state concessions, grants or LMI automatically. Confirm the amount for your transaction before relying on the result.
Ownership costs can include rates, building insurance, maintenance and strata charges. Avoid counting shared living costs on only one side. The buyer pays the deposit and upfront costs in cash; the mortgage is property price minus deposit.
Read net wealth separately from housing outlay
Buyer net wealth is future property value, less selling costs and the remaining loan, plus any invested monthly savings. Renter net wealth is the invested starting funds plus invested monthly savings and returns. Negative buyer equity remains visible.
Cumulative housing outlay includes principal repayments, so it is not a measure of money lost. Principal builds equity. Net wealth includes that equity; rent and mortgage payments are not deducted a second time from the portfolios.
Test more than one growth scenario
Property growth, investment returns and future rent changes are assumptions, not forecasts. Investment returns should be entered after relevant tax and fees. The model permits negative growth and returns to explore less favourable outcomes.
Try lower property growth, higher mortgage rates and a shorter holding period. Then test stronger rent growth or a lower investment return. A small change can alter which option has higher projected wealth.
Why your time horizon matters
Buying and selling costs can be significant relative to equity over a short holding period. A longer horizon gives more time for loan repayment and compounding, but also makes future assumptions less certain.
The first year-end where buying leads is shown only as a modelled observation. The lead can reverse later. It is not a guaranteed break-even date. The chart and annual table let you inspect the full path.
Calculation method and timing
The mortgage uses monthly principal-and-interest repayments with the annual rate divided by 12. Property growth and investment returns use equivalent compounded monthly rates. Monthly rent is weekly rent multiplied by 52 and divided by 12.
Rent and ownership costs increase at the start of each new model year. Investment returns apply before that month’s savings contribution. Once the mortgage is repaid, buyer outlay includes ownership costs only. Selling costs are applied at each displayed comparison point as if the home were sold then.
Assumptions and limitations
All figures are nominal future dollars and are not adjusted for inflation. The model excludes rate changes, refinancing, offset accounts, extra repayments, renovation value, rent bonds, moving costs and tax on a property sale. It assumes an owner-occupied home and no missed payments.
The renter invests rather than spends the available funds. Any lower-cost monthly difference is also invested. Actual behaviour, investment losses, tax treatment and market conditions may differ. Non-financial considerations such as stability, flexibility and location remain important.
Frequently asked questions
Does renting always mean wasting money?
No. Rent pays for housing and flexibility. A fair financial comparison also considers the costs of ownership and what a renter does with their available savings.
Is stamp duty calculated automatically?
No. Enter applicable duty and other purchase charges in upfront buying costs. State eligibility and concessions must be checked separately.
What does the renter invest initially?
The deposit plus the upfront buying costs that would otherwise be spent on the purchase.
What happens when buying becomes cheaper each month?
The buyer invests the monthly difference, using the same investment return assumption as the renter.
Does the mortgage repayment include principal?
Yes. Principal reduces the loan balance and builds equity. It is included in housing outlay, but is not treated as an additional loss in the wealth calculation.
Are these live interest rates or forecasts?
No. All rates and growth assumptions are editable illustrations, not live quotes or predictions.
Can I download the comparison?
Yes. The CSV includes your assumptions and annual property, loan, portfolio, wealth and housing-outlay figures.
Does this assess borrowing capacity?
No. It assumes you can fund the purchase and the equal monthly budget. A separate loan assessment is needed.
Explore your home loan options
Talk to Capital Connections about the next step in your home buying plans.
Further reading: ASIC Moneysmart: buying a house. General estimates only, not financial advice, approval or a forecast. This calculator does not submit your financial inputs.