Rent vs. Buy Calculator
One of the biggest financial decisions you'll ever make. Let's break down the numbers to see which option makes more sense for you.
This is the amount you currently pay or expect to pay as monthly rent
The total purchase price of the home you are considering buying
The initial payment you make when buying a home (typically 20% of the home price)
How many years you plan to take to repay the home loan
The annual interest rate on your home loan (currently around 8-9% in India)
Note: We assume a 5% annual increase in rent and a 5% annual appreciation in property value for this calculation.
Renting may be better for you
per month for 20 years
assuming 5% annual rent increase
down payment + EMIs + maintenance for 25 years
Cost Comparison Over Time
This graph shows how your costs and home value change over 25 years. When the green line (Home Value) rises above the red line (Total Buying Cost), buying becomes profitable.
How to use this calculator:
- Enter your current or expected monthly rent
- Enter the price of the home you want to buy
- Enter how much down payment you can make
- Enter the loan period and interest rate
- See the results and comparison between renting and buying
The Case for Renting
Pros:
- Flexibility: Easily relocate for jobs or lifestyle changes.
- Lower Upfront Cost: No large down payment or closing costs required.
- No Maintenance: Landlord is responsible for repairs and upkeep.
- Investment Opportunity: You can invest the money saved on a down payment. See how it could grow with our SIP Calculator.
Cons:
- No equity building; your payments don't create an asset.
- Rent typically increases annually.
- Limited freedom to customize your living space.
The Case for Buying
Pros:
- Build Equity: Each payment increases your ownership stake.
- Potential Appreciation: Property value may increase over time, building wealth.
- Stable Payments: With a fixed-rate loan, your EMI remains the same.
- Tax Benefits: Deductions on loan interest and principal payments.
Cons:
- High upfront costs (down payment, stamp duty).
- Responsible for all maintenance and repair costs.
- Less flexibility to move; selling a house can be costly and time-consuming.
- Your monthly housing cost (EMI) can be calculated with our EMI Calculator.
Understanding the Financial Breakeven Point
The "breakeven point" is the most critical concept in the rent vs. buy decision. It's the number of years you need to live in a home for the financial benefits of owning to outweigh the costs. Before this point, renting is typically cheaper due to the high upfront costs of buying (like stamp duty and processing fees). After the breakeven point, the equity you've built and the property's appreciation make buying the smarter financial choice. A common breakeven point is 5-7 years, but it varies greatly based on your local property market, rent, and loan terms.
Frequently Asked Questions (FAQ)
Is it better to rent or buy a home?
There is no single correct answer. Buying is often better if you plan to stay in one location for 5-7+ years and want to build equity. Renting is better for those who need flexibility, want to avoid maintenance costs, or live in a market with a high price-to-rent ratio. Our calculator provides a financial comparison to help you decide based on your specific numbers.
What are the hidden costs of buying a home?
Beyond the down payment and EMI, hidden costs of buying include property taxes, homeowners insurance, maintenance and repairs (often estimated at 1-2% of the home's value annually), society maintenance fees, and potential renovation costs. These recurring expenses are crucial to factor into your budget.
What is the 'rent vs. buy breakeven point'?
The breakeven point is the number of years after which the total cost of owning a home becomes less than the total cost of renting a similar property. It's the point where the equity you've built and the appreciation of your property outweigh the high initial and ongoing costs of homeownership.
How do tax benefits affect the rent vs. buy decision?
Homeowners in India can claim tax deductions on both the principal (under Section 80C) and interest (under Section 24) portions of their home loan, significantly reducing their effective cost. Renters can claim House Rent Allowance (HRA) if provided by their employer. Typically, the tax benefits for homeowners are more substantial, making buying more attractive from a tax perspective.