Rent vs Buy Calculator
Whether it makes more financial sense to buy or keep renting depends on your savings, the purchase price, how long you plan to stay, and what you’d do with your money if you didn’t buy. This calculator runs both scenarios side by side so you can see the actual numbers rather than guessing.
How to use this calculator
Enter your annual income, available savings, the purchase price you’re considering, and your state. Then add your current rent and the interest rate you expect to borrow at. The calculator uses your income to account for capital gains tax on any investment returns in the renting scenario, so this figure matters.
The result shows which option leaves you in a stronger financial position at 5, 10, and 30 years. Toggle between those timeframes – the answer often changes depending on how long you plan to stay in the property.
The advanced settings let you refine the assumptions. Under property settings you can adjust the loan term, property growth rate (which auto-populates based on your state but can be overridden), ongoing costs like rates and insurance, and strata fees if you’re buying an apartment. Under investment settings you can change the assumed return on your savings if you don’t buy – the default assumes you invest the difference, which is the fairest comparison.
The monthly cost breakdown in the results shows year one only. Costs shift over time as rent increases and your mortgage balance reduces, which is why the wealth position at each time horizon tells the fuller story.
These are projections based on the assumptions you enter. Growth rates, investment returns, and interest rates will all vary in practice.
Common Questions
Is it always better to buy than rent in Melbourne? Not necessarily, and the answer depends heavily on how long you stay. Buying has high upfront costs – stamp duty, conveyancing, inspections – that take years to recover through property growth. If you’re likely to move within five years, renting and investing the difference can produce a comparable or better outcome. Beyond ten years, buying tends to come out ahead in most Melbourne markets, but the calculator lets you test your specific numbers rather than rely on a generalisation.
What property growth rate should I use? The calculator auto-populates a rate based on your state using long-run historical data. You can override this in the advanced settings. In practice, growth varies significantly by suburb, property type, and market cycle. A conservative figure – somewhere between 4% and 6% – is a reasonable starting point for planning purposes. Using a higher number makes buying look more attractive; using a lower one narrows the gap. Try a few different rates to see how sensitive the result is to your assumption.
What happens to my savings if I rent instead of buy? The calculator assumes you invest your available savings and any monthly surplus from renting at a lower cost than owning. The default projected return is 8% p.a., roughly in line with long-run Australian share market returns before tax. You can adjust this in the advanced investment settings, along with what proportion of your savings and monthly surplus you’d actually put to work. If you’d spend the difference rather than invest it, reduce that percentage – it changes the outcome significantly.
Does the calculator factor in stamp duty? Yes. Stamp duty is calculated based on your state, purchase price, and property type and included in the upfront costs for the buying scenario. This is one of the reasons buying takes time to break even – you’re starting behind before the first mortgage payment is made.
The calculator gives you a framework, but the rate you borrow at, the loan structure, and how much you can actually access from a lender all affect whether buying is realistic right now. If the numbers are looking close and you want to understand what’s actually available to you, you can book a call using the button below.
