How Our Calculator Works

1. Introduction

Choosing whether to rent or buy a home is one of the most significant long-term financial decisions most people face. But comparing monthly rent to a monthly mortgage payment is misleading—these two numbers represent entirely different financial structures, risks, and obligations.

This calculator focuses on the real question: Which option leaves you with a higher net worth over your chosen time horizon?

To answer this, we model both scenarios over time, including:

• Upfront costs (Down payments, taxes, notary fees)
• Ongoing monthly housing costs
• Home value changes (Appreciation)
• Rent increases (Inflation)
• Investment returns (Opportunity cost)
• Local taxes and fees (which vary widely by country)

The methodology is designed to apply globally, whether you live in the United States, United Kingdom, France, Germany, Canada, Australia, Singapore, or elsewhere.

2. Total Cost of Ownership: Buying

Buying a home involves a combination of upfront costs, financing costs, and recurring ownership expenses. These differ considerably by country. Our model captures the full structure.

A. Upfront Costs (Country-Dependent)

Each market has its own terminology and fee structure:

• Down Payment (Deposit): Typically 10–30% of the purchase price, depending on country and lender requirements.
• Transaction / Closing Costs: These vary globally and may include transfer taxes, legal fees, registration fees, valuation fees, and government duties.

B. Monthly / Annual Ownership Costs

• Mortgage Payment: Calculated using standard amortization. In some countries (US/FR), fixed-rate loans for 20–30 years are common. In others (UK/CA/AU), rates reset every 2–5 years.
• Property Taxes: Annual taxes (US/CA), Council Tax (UK), or local land charges.
• Maintenance / Strata Fees: A typical assumption is 1% of property value annually for maintenance, plus building/condo fees where applicable.

3. Total Cost of Renting

Renting is simpler, but still has relevant financial components.

• Upfront Costs: Security deposits (1–3 months) and broker fees (common in Germany or parts of Asia).
• Rent Inflation: Rent tends to increase annually. While we use a default global assumption (e.g., 2–3%), this is fully adjustable in the settings.

4. Opportunity Cost: The Hidden Variable

Buying requires tying up significant capital in the down payment and transaction costs. Renting keeps that capital free for investment.

Meanwhile, homeowners build wealth through loan amortization (paying down debt) and home value appreciation. The calculator compares these two wealth-building trajectories side-by-side.

5. The Break-Even Point

The break-even point occurs when the Buyer's Net Worth surpasses the Renter's Net Worth.

• Selling before the break-even year? Renting is likely the mathematically superior choice due to unrecoverable transaction costs.
• Staying longer? Buying typically creates more long-term wealth through forced savings and appreciation.