Buy vs rent: the real maths
"Renting is dead money" is one of the most repeated — and most misleading — lines in UK personal finance. The honest answer depends on house-price growth, investment returns, how long you stay and the often-ignored costs of buying and selling. This guide explains how to compare the two fairly.
Why a fair comparison uses net worth, not rent vs mortgage
Comparing a monthly rent to a monthly mortgage payment is the classic mistake. Part of a mortgage payment buys you equity — it's saving, not spending — while a renter who pays less each month can invest the difference. A fair comparison gives both people the same monthly housing budget and asks a single question: after X years, who has the greater net worth? The buyer's wealth is the equity they'd walk away with if they sold; the renter's is their investment pot from the deposit they never tied up, plus any monthly savings.
The two levers that decide it
The costs of owning that nobody mentions
Buyers focus on the deposit and forget the rest. Upfront: stamp duty, legal fees, survey, mortgage arrangement fees and removals — often 3–5% of the price. Ongoing: maintenance (budget around 1% of the value a year), buildings insurance, service charges and ground rent on leaseholds, and the interest portion of the mortgage, which is itself "dead money" in the same way rent is. On exit: estate-agent and legal fees of roughly 1.5–2.5% when you sell. These frictions are why buying rarely wins over short horizons.
The renter's hidden advantage — and its catch
A renter keeps the deposit liquid and can invest it. Over decades, a diversified portfolio has historically returned more than house prices in many periods — so the "opportunity cost" of locking a deposit into bricks is real. The catch is discipline: the maths only works if the renter actually invests the deposit and the monthly savings, rather than spending them. Renting also offers flexibility (no selling costs to move) but no protection against rising rents, which a fixed mortgage gives a buyer.
Why buying can win big — the leverage effect
A mortgage is leverage. With a 15% deposit you control an asset worth roughly 6.7 times your cash, and any house-price growth applies to the whole value, not just your deposit. If a £300,000 home rises 3% a year, that's £9,000 of growth on a £45,000 deposit — a 20% return on your cash in year one, before costs. This leverage is what lets buyers overtake renters once enough time has passed for growth to outweigh the upfront and selling frictions.
The break-even horizon
Because buying carries heavy upfront and exit costs, it almost always loses over short periods and tends to win over long ones. The crossover year — when the buyer's net worth overtakes the renter's — is the single most useful output above. As a rough guide, with moderate growth assumptions, buying often breaks even somewhere between years 5 and 10; faster house-price growth or lower investment returns pull that forward, and the reverse pushes it back. If you expect to move within a few years, renting frequently wins on the numbers alone.
£300,000 home, 15% deposit, 15 years
With a £45,000 deposit, a 4.7% mortgage over 25 years, 3% house-price growth, 3% rent growth and a 5% investment return, buying typically falls behind for the first few years while upfront costs drag, then overtakes renting once equity and growth compound — often pulling clearly ahead by year 15. Drop house-price growth to 1% or lift investment returns to 7%, and renting can stay ahead the whole time. The point isn't a single answer; it's to see how sensitive the outcome is to assumptions you control.
What the calculator can't price
Numbers don't capture everything. Owning brings security of tenure, freedom to decorate and a fixed housing cost in retirement; renting brings flexibility, no maintenance liability and no exposure to a single illiquid asset. Many people will pay a financial premium for the certainty of owning — and that's a perfectly rational choice. Use the maths to understand the trade-off, not to override what matters to you.
Common mistakes
- Comparing rent to the mortgage payment. Ignores equity built by the buyer and savings invested by the renter. Compare net worth instead.
- Forgetting buying and selling costs. Stamp duty, legal fees and agent fees can total 5–7% round-trip and crush short-term buying.
- Assuming house prices only rise. Prices fall in some periods. Test a low- or negative-growth scenario before committing.
- Not actually investing as a renter. The renting case only wins if the deposit and monthly savings are genuinely invested, not spent.
- Ignoring how long you'll stay. If you might move within a few years, the exit costs of buying usually make renting cheaper.