Rent vs Buy: The Numbers Behind the Decision
Buying a home is not automatically better than renting — it depends on how long you stay, local property values, mortgage rates, and what you'd do with the capital if you rented. The "renting is throwing money away" argument ignores the hidden costs of ownership and the opportunity cost of a deposit.
True Costs of Buying
- Mortgage interest (largest cost, especially early)
- Stamp Duty / transfer taxes (one-off, ~2–5% of purchase price)
- Solicitor and survey fees (~£2,000–£3,000)
- Maintenance and repairs (estimate 1–2% of property value per year)
- Building insurance (~£200–£400/year)
- Opportunity cost of deposit (£50k deposit at 6% = £3,000/year foregone)
True Costs of Renting
- Monthly rent payments
- Contents insurance (~£100–£200/year)
- Moving costs (more frequent)
- No equity built — but capital remains liquid and investable
The Break-Even Horizon
Due to transaction costs (stamp duty, legal fees), buying typically requires 5–7 years to break even versus renting — even with modest house price appreciation. In high price-to-rent ratio markets (London, New York), the break-even horizon extends further.
Price-to-Rent Ratio
P/R ratio = Property price ÷ Annual rent
Below 15: Buying is typically favourable
15–20: Either can make sense
Above 20: Renting is often cheaper short-to-medium termCompare rent vs buy costs: Free Rent vs Buy Calculator