Rent vs. Mortgage Calculator: What's More Profitable?

Rent & Investice

Appreciation of savings (down payment) and monthly surpluses.

Mortgage

You’re facing a significant life decision: Should you take out a mortgage to buy your own home, or is it better to rent? Many people believe the answer is obvious – ‘a mortgage means throwing money away on interest, while rent is just money out the window to a landlord.’ However, the economic reality is far more complex.

This online rent vs. mortgage calculator will reveal the true financial implications of both options. We rely on mathematics and compound interest, not emotions or assumptions. Be prepared for the comparison results to surprise you.

Why Comparing Rent vs. Mortgage is Important

The decision between renting and buying a property will affect your personal finances for decades to come. It’s not just a simple comparison of a monthly mortgage payment versus rent. It’s about a comprehensive financial strategy.

What our calculator considers:

  • 💰 Mortgage interest costs – did you know that over 30 years, you often pay the bank almost as much in interest as the property itself cost?
  • 📈 Property value appreciation – historical growth of home prices (typically 3–5% annually).
  • 🏗️ Costs of ownership – repair funds, insurance, taxes, and maintenance (approx. 0.5–1% of property value annually).
  • 💸 Transaction fees – real estate agent commissions, legal services, registration fees.
  • ⚡ Opportunity cost – what would happen if you invested your own funds (down payment) into stocks or ETFs?
  • 💼 The power of compound interest – how a small difference in interest can result in millions over 30 years.

💡 Key Concept: Investing the Difference (Rent & Invest)

This is a factor most comparison tools overlook: If rent is cheaper than a mortgage payment, you must invest the saved difference. Only then is the comparison fair.

Practical example:

  • Rent: 22,000 units per month
  • Mortgage: 34,254 units per month
  • Difference: 12,254 units per month

👉 If you invest these 12,254 units monthly (e.g., in an S&P 500 ETF with a 7% p.a. return), in 10 years you’ll have 2.1 million units in your account! This is why renting can be more profitable in the long term.

How the Calculator Determines Housing Advantage

To determine the winner, we model two parallel life scenarios:

Scenario A: Renting + Investing

  1. Initial Capital: Money you would use for a down payment (e.g., 1.2 million units) is invested right from the start.
  2. Monthly Cash Flow: You pay rent, which increases annually with inflation.
  3. Investing the Difference: Since rent is cheaper than a mortgage, you send the difference to an investment portfolio each month.
  4. Result: Your wealth consists of a liquid portfolio (stocks, bonds, ETFs).

Scenario B: Mortgage + Property Ownership

  1. Initial Capital: Your own funds (20% of the price) become a down payment to the bank.
  2. Monthly Cash Flow: You pay the mortgage installment + utility fees + property maintenance.
  3. Principal Repayment: With each payment, your debt to the bank decreases.
  4. Price Growth: The value of your home increases over time.
  5. Result: Your wealth consists of the property’s value minus the remaining debt.

Model Example: A Home in a Mid-Sized City (10 years)

Parameters: Property for 6,000,000 units vs. rent 18,000 units/month.

⚪ Renting Scenario Result

  • Total rent paid: ~2.95 million units
  • Investment portfolio value: ~4.23 million units (appreciated down payment + invested difference)
  • Net Worth: 4.23 million units 💰

🏠 Mortgage Scenario Result

  • Total paid to bank and fees: ~4.68 million units
  • Property value after 10 years: 8.88 million units
  • Remaining debt to bank: -3.96 million units
  • Net Worth (after sale): 4.56 million units 🏡

🏆 Verdict after 10 years:

Mortgage wins by approx. 330,000 units. Note: The break-even point in this model occurs after 7–8 years. If you were to move earlier, renting would be more beneficial.

When is Renting More Beneficial?

✅ Choose to rent if:

  • You plan a short-term stay: You intend to live in the area for less than 7 years.
  • Interest rates are high: Mortgages with rates above 6–7% make ownership extremely expensive.
  • You’re skilled at investing: You can achieve returns of 7–10% p.a. in the stock markets.
  • You want flexibility: You need the option to quickly change jobs or cities.
  • Property prices are at their peak: There’s a risk of market stagnation or decline (e.g., a bubble).
  • You don’t have a down payment: You lack 20% of the property’s price (LTV).

When is a Mortgage More Beneficial?

✅ Choose a mortgage if:

  • You’re looking for a home for 15+ years: Transaction costs will be absorbed over time.
  • Property prices are rising: You expect price growth in the area (e.g., major cities).
  • You want ‘forced savings’: A mortgage compels you to build equity every month, which for some is better than investment discipline.
  • You utilize financial leverage: The entire value of the property appreciates, not just your invested money.
  • Psychology is key for you: The feeling of ‘owning your home’ has invaluable worth to you.

Frequently Asked Questions (FAQ)

📉 Is it better to wait for property prices to fall?

Timing the market is risky. Historically, it's true: "The best time to buy property was 20 years ago." If you wait for a decline, you risk prices increasing in the meantime or interest rates rising. If you plan to live in the property for 15 years or more, the current price fluctuation doesn't play a crucial role.

💰 How much do I need saved for a mortgage (down payment)?

The standard is **20% of the property's appraised value** (80% LTV). For young applicants (often up to age 36 in some countries), 10% may be sufficient, but expect a higher interest rate. Always keep a reserve of at least 6 months' worth of expenses outside of your down payment!

📈 Is it realistic to achieve a 7% return on investments?

Yes, this is the historical average of the US stock market (S&P 500 index) after adjusting for inflation over the past 100 years. It's not a guaranteed return for every single year (markets fluctuate), but over a 10+ year horizon, it's a very realistic estimate for a diversified ETF portfolio.

🤔 Why does the calculator assume selling the property at the end?

To fairly compare 'apples to apples.' With renting, you have liquid cash (investments) at the end. With a mortgage, you have 'bricks and mortar.' To determine net worth, we must virtually sell the property, subtract the remaining debt, and account for selling costs. Only then do you get a final comparable number.

📊 Is 10% property price growth sustainable?

Not in the long term. While some regions have experienced years with 15% growth, the long-term average typically mirrors inflation and wage growth (approx. 3–5% annually). If you input 10% growth for 30 years into the calculator, you'll get astronomical and unrealistic figures. Be conservative with your estimates.

Soft Factors: What the Numbers Don’t Tell You

The calculator will provide a mathematical result, but it doesn’t account for emotions.

  • In favor of a mortgage: Security that no one will evict you, the ability to renovate as you wish, stability for children.
  • In favor of renting: Freedom, no worries about boiler or roof repairs, the option to easily change locations.

Start Calculating Now

Unsure how to decide? Enter your parameters into the calculator above. Change the interest rate, expected price growth, or rent amount, and watch how the charts change in real-time. The numbers will show you the way. 🚀