Rent vs Buy Calculator

Compare the long-term cost of renting against buying a home.

Overview

Evaluates the long-term wealth difference between buying a home with a mortgage versus renting and investing the down payment in equity index funds.

Formula & Calculation Method

Net Buying Wealth = Property Value - Buying Costs | Net Renting Wealth = Compounded Investment Portfolio - Cumulative Rent

Compares mortgage interest, maintenance, property tax, and home appreciation against rent escalation and equity compounding returns.

Worked Example: ₹70 Lakh Property vs ₹20,000 Monthly Rent over 15 Years

Inputs: Home Price = ₹70,00,000 | Down Payment = ₹14,00,000 | Rent = ₹20,000/mo | Home Appreciation = 5% | SIP Return = 12%

  • Buyer Path: ₹56 Lakh loan at 8.5% costs ₹48,590/mo EMI + maintenance + taxes. House appreciates to ₹1.45 Crores.
  • Renter Path: Pays ₹20,000/mo rent (5% escalation) and invests ₹14 Lakh down payment + ₹28,590 monthly savings in equity at 12%.
  • Renter's investment portfolio grows to ₹2.10 Crores over 15 years.

Summary: Buyer Home Equity = ₹1.45 Crores | Renter Investment Corpus = ₹2.10 Crores | Net Financial Advantage = Renting (+₹65 Lakhs)

Common Use Cases

  • Relocation Decisions: Decide whether buying makes sense if career mobility requires relocating within 3-5 years.
  • Opportunity Cost Analysis: Evaluate how investing down payment capital in equity markets compares with real estate appreciation.
  • Lifestyle Financial Planning: Balance the psychological emotional security of homeownership against capital flexibility.

Frequently Asked Questions

What is rental yield?

Annual rent divided by total property purchase price (e.g. ₹2.4 Lakh annual rent on ₹80 Lakh home = 3% rental yield).

When does buying a home make more financial sense than renting?

When you plan to stay in the home for 10+ years, property prices appreciate rapidly, or mortgage interest rates drop significantly.

What are the hidden costs of homeownership?

Stamp duty (5-7%), interior fitouts, annual maintenance charges (AMC), property taxes, and loan interest.

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