Rent or buy a home? How to decide with real numbers
Buying a home beats renting only if the yearly cost of owning is lower than the rent for the same home, over the number of years you'll actually stay. The cost of owning isn't your EMI; it's interest, maintenance, taxes, and what your deposit could have earned elsewhere, minus any price growth.
Recommended resource: for the full step-by-step method, Real Estate: Everything You Need to Know by Manthan Bhendkar (founder of Asendify) covers this in depth. PDF, £1450.00, instant download.
This is general information, not financial advice. Use your own numbers.
The 5 numbers that decide it
- Rent for the same kind of home.
- Price plus buying costs (stamp or transfer duty, registration, fees).
- Your loan rate and how much you borrow.
- What your deposit could earn if it stayed invested.
- How many years you'll stay. Buying and selling costs are large, so short stays almost always favour renting.
The yearly cost of owning
Add these up for one year:
- Mortgage interest (not the principal part of the EMI; that's savings in brick form)
- Lost return on your deposit (deposit × what it would earn safely)
- Maintenance, repairs, service charges
- Property tax and insurance
- Buying and selling costs spread over your stay (total ÷ years)
Then subtract expected price growth for the year, and be conservative.
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Worked example
Home price 10,000,000. You put down 2,000,000 and borrow 8,000,000 at 8.5%.
- Interest in year one: about 680,000
- Lost return on the 2,000,000 deposit at 7%: 140,000
- Maintenance, tax, insurance: 120,000
- Buying costs of 700,000 + future selling costs of 200,000, spread over 7 years: about 129,000
- Price growth at 4%: −400,000
Cost of owning: about 669,000 a year (≈ 55,700 a month).
If the same home rents for 35,000 a month (420,000 a year), renting is cheaper by roughly 249,000 a year, and the renter can invest the difference. If rent were 60,000 a month, buying wins.
Change one assumption at a time to see what drives the answer. Usually it's the loan rate, the years you stay, and how much price growth you're betting on.
The price-to-rent shortcut
Price ÷ annual rent gives a quick signal:
- Under ~15: buying often looks good on numbers
- 15–25: depends heavily on rates and how long you stay
- Over ~25: renting usually wins financially
It's a rough screen, not a decision. Run the full calculation before you commit.
Things the numbers miss
- Stability: no landlord asking you to leave; freedom to renovate.
- Flexibility: renters can move for a job or a better area quickly.
- Forced saving: some people only build wealth because the EMI forces them to.
- Concentration risk: most of your net worth in one building in one city.
Decide the money question first, then decide whether the non-money reasons are worth the difference.
Common mistakes
- Comparing rent with the full EMI instead of with interest + costs.
- Assuming prices always rise 10% a year.
- Ignoring that the deposit could have earned a return.
- Buying for a 2-year stay and losing the buying and selling costs.
The full rent vs buy method, with country-specific costs for the UK, US, India and Dubai, is in Real Estate: Everything You Need to Know.
FAQ
Is rent "dead money"?
No more than interest is. Rent buys housing; interest buys borrowed money. Compare the two, not rent vs EMI.
How long do I need to stay for buying to make sense?
Long enough for price growth and lower yearly costs to recover the buying and selling costs. Run the example above with 3, 5 and 10 years and see where it flips.
Should I buy if rates might fall?
Decide on today's rates. If they fall later you may refinance, but don't buy on a forecast.
More playbooks on other topics: https://www.asendify.co/books/
Everything You Need to Know. £1450.00 one-time, instant download.