Rent vs Buy Calculator - Buy vs Rent Net-Worth Comparison
Compare the financial impact of renting a house vs buying a property with a home loan over time.
Rent vs Buy Inputs
Net Worth Comparison
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Calculation Methodology & Rules
The Rent vs Buy Calculator compares the financial outcomes of renting a house vs buying a property with a home loan over a set investment horizon. Read our comprehensive analysis: Rent vs Buy in India: The Real Math or learn about other costs in Buying Property in India.
1. The Buy Path Net Worth
In the Buy path, we assume you pay a down payment at Year 0, pay monthly EMIs, and pay annual property maintenance. At the horizon:
- Your property appreciates annually by the appreciation rate.
- Outstanding home loan balance is calculated and subtracted from the property value.
- All cash outflows (down payment + EMIs + maintenance) are compounded at your opportunity rate (Investment Return %) and subtracted to represent cash spent.
2. The Rent Path Net Worth
In the Rent path, your down payment is invested in the market at Year 0. Each year you pay rent (which escalates annually). Your cash pool compounds at the opportunity rate, minus the rent paid out.
Comparison
At the end of the horizon years, we compare the final net worth of both paths. The path with the larger net worth is the financially optimal choice.
Frequently Asked Questions
Financially, it depends on several variables: the property price, rent level, loan rate, property appreciation, and opportunity cost of investing the down payment. Buying is generally better if you plan to stay in the home for a long time (typically 5-10+ years), while renting is better for flexibility and short horizons.
The opportunity cost is the return you could have earned by investing your down payment and the monthly savings (EMI - Rent) in financial assets like equity mutual funds, instead of tying it up in real estate.
The breakeven year is the point in time where the accumulated net worth of the 'Buy' path (appreciated property value minus outstanding debt) surpasses the net worth of the 'Rent' path (escalating rent savings invested in the market). Before this year, renting is more financially advantageous.