How to use the Rent vs Own Home tool

The short version

1. 1Start from a city

   In Quick Start, search a city and pick a home type. Its price, rent, running costs and loan terms fill the form.

2. 2Make it yours

   The home and the loan on Home, the rent on Rent, savings, price growth and the horizon on Assumptions.

3. 3Read who ends ahead

   One sentence says which path ends ahead and by how much. The chart and the table show every year. The Sensitivity page sets several homes side by side.

Nothing is uploaded. Every figure is worked out in your browser. This guide is general information, not financial advice.

The screen

Inputs on the left, the answer and the chart beside them, the detail under the chart. Point at a part in the list to see where it is.

The Sensitivity page, linked under the header as the Sensitivity Analysis Tool, runs the same model on the same inputs, a column per home.

Top right on both pages, Tour replays a one minute walk through the page, and Guide opens this page.

Quick Start

A typical home in one of 33 cities, from a studio to a four-bedroom house, with its local price, rent, running costs and loan terms. Each figure and its source is on the Quick Start assumptions page.

On a phone, press Full screen under a demo and turn the phone sideways to read it.

• A Quick Start is a fresh start. It resets every field first, so nothing from the last home carries over.
• Then change anything. The tool keeps your figures in this browser for your next visit.

The Home tab

The home you would buy, the loan you would take, and what owning costs on top of the loan.

• A switch restates the figure. 4.51% of an $855,000 price becomes 38,560.5 dollars, not 4.51 dollars. A change of frequency does the same.
• Detailed costs. The Detail control above the costs lists each one by name, each with its own basis and growth.
• Cost = interest only (Detailed) picks what Accumulated cost counts. It never moves net equity.

The Rent tab

The rent you would pay instead, how fast it rises, what renting costs on top, and an optional third path that rents first and buys later.

• Rent-Then-Buy buys at the price by then, grown by house price growth, with the same deposit share and a new loan on the same terms.
• It shares the money. Left blank, the budget and the starting cash grow to fund its later deposit, which lifts Own and Rent by the same amount.

The Assumptions tab

The guesses about the future, and the money both paths start with and live on.

• General inflation changes no figure in the plan. It only sets how Show in today's money reads them.
• Budget annual increase appears once a budget is set, for wage growth or inflation.
• A warning shows under the tabs when a set budget or cash leaves a path below zero.

The answer and the chart

The sentence at the top is the whole answer. Under it: the money it is read in, four figures and the chart.

• Blue is owning, gold is renting. Neither is good or bad: they are the two options, so the answer is never coloured as a gain or a loss.
• Breakeven is for good. It is the year owning gets ahead and stays ahead to the horizon, found from the end backwards.
• Zoom and pan the chart with the wheel or a drag; ⟳ resets it.

Snapshots, cashflow and assumptions

Under the chart, the working behind the answer.

• Every row adds up. Cash at start, plus the budget and cash interest, less what the year cost, is cash at end.

Save, export and share

The tool keeps your plan in this browser between visits. The rest makes something to keep or send.

Same inputs, two screens

The Sensitivity page runs the very same engine on the very same fields, laid out as a table: a row per field, a column per home. Point at a field in the list to see it on both.

• What it adds. Several homes, cities or loans on one horizon, one savings rate, one starting cash and one budget, in one currency or several.
• What it holds fixed. The model: a column on its own gives the main page's figures. The Perth house's Own minus rent reads +$1.78m there: the main page's +$850k in today's money, counted in future's money instead.

The Sensitivity page

Each column is a scenario. Fill one from a city, set the next beside it, and read the answers across.

• Per column. Under the results, ⬇ saves that column's own or rent cashflow, and the chart icon draws it alone.
• Drag a column by its grip to reorder it; no figure changes.

The model in one picture

Two households start with the same cash and spend the same monthly housing budget for the same years. One buys: the deposit and setup costs leave its cash on day one, and the budget pays the mortgage and the owning costs. The other rents: it keeps all its cash and pays the rent and renting costs. Whatever either has left over each month is saved at the Risk-Free Rate. At the horizon the tool asks what each would own if the home were sold.

• V_Tthe home's value in the last year
• sSelling cost, as a share of the sale
• B_Tthe loan still owed
• C_Teach path's cash at the horizon
• ithe Risk-Free Rate a year
• ma month; budget and outgoings are that month's

The headline, Equity difference, is Own minus Rent. Both paths share the budget and the starting cash, so those cancel out of it, and what is left is the whole decision:

• Dthe deposit plus setup costs, paid on day one
• O_mowning's outgoings: repayment plus owning costs
• R_mrenting's outgoings: rent plus renting costs
• Nmonths in the horizon, T × 12

• Opportunity cost. The deposit is not free money: left in the bank it would have grown at the Risk-Free Rate. The middle term is that growth.
• The monthly gap compounds too. In year 1 owning usually costs more than renting, and the renter saves the difference. As rent grows and the repayment stays level, the gap closes and can turn; after the loan is repaid, owning costs only the running costs.
• Leverage. The home's growth applies to the whole price, not just the deposit. That is why House price growth moves the answer most.

Budget and Initial cash change how much each path ends with, never which ends ahead or by how much. They decide how much is saved, and both paths save it at the same rate. The demo on the Assumptions tab shows it: a $6,000 budget lifts both lines and leaves the lead where it was.

Home: the property and the mortgage

The loan is what the deposit does not cover. A principal and interest loan is repaid in equal monthly instalments; each one pays the month's interest first and the rest cuts the balance.

• PProperty price
• dDown payment, as a share
• rMortgage rate ÷ 12
• nMortgage term × 12 months

Watch out: a bigger deposit is not always better. Each dollar of deposit saves the mortgage rate and gives up the Risk-Free Rate. In the Perth example (6.4% against 4.6%) a 30% deposit lifts owning by $37k; if savings earned more than the loan cost, it would do the opposite.

Home: the costs of owning

Setup costs are paid once, from cash, and never come back: the day you buy, your net equity falls by them. Running costs are paid every month from the budget, on top of the loan.

• uSetup cost as a % of the price
• cOngoing costs of owning, a year
• g_cOngoing cost growth
• kthe % of home value, when the type is a %

Watch out: a % of value grows with the home. 1% of value at 4.5% growth costs 3.6 times as much in year 30 as in year 1. A fixed amount grows only at its own rate, 0% unless you set one.

Rent, and Rent-Then-Buy

Rent steps up once a year at rent growth. Renting costs are fixed amounts growing at their own rate, or a share of the year's rent.

• R₀Rent amount, as a month (a week × 52 ÷ 12)
• g_rRent growth
• gHouse price growth
• YBuy at year

Assumptions: growth, savings, time and money

The home grows at the end of each year. Cash earns the Risk-Free Rate, compounded monthly so a year earns exactly that rate. Net equity counts the home as sold that year, less selling costs.

• gHouse price growth (RPPI)
• πGeneral inflation
• O_t, R_teach path's monthly outgoings that year
• Ddeposit plus setup cost

Watch out: the renter earns the Risk-Free Rate, not the share market. "Invest the difference" here means a savings account. Raising the rate to a share market's average return adds the return without the risk, which flatters renting.

Several homes on one budget (the Sensitivity page)

Columns only compare fairly when each plays with the same money for the same time. So the page works out one plan for the whole table, then runs every column through the same engine with its share of it.

• ja column
• ka month from today
• need_jwhat column j alone would need that month
• i_jthe Risk-Free Rate of the column's currency

Watch out: two currencies are never added as one. A home from a Quick Start city in a new currency turns Multi-currency on. Turned off again, columns in different currencies are flagged above the results.

Worked example: Perth, two-bedroom house

The Quick Start figures: $855,000 price, 20% deposit, 6.4% over 30 years, 4.51% setup, $7,900 a year to own (growing 2.5%), $650 a week rent (growing 3.5%), $1,400 a year to rent (growing 2.5%), 4.5% house price growth, 2.8% selling cost, 4.6% Risk-Free Rate, 30 years, 2.5% general inflation.

• Where the two paths land. Own $3,305,675 and Rent $1,522,207 in year 30, or $1.58m and $726k in today's money, as the answer's second line says.
• Why owning catches up. Rent is $2,933 a month in year 1 and $7,877 by year 30; the repayment stays at $4,278. Renting becomes the dearer of the two in year 19, though owning is ahead for good from year 5.

What moves the answer

Every input moved on its own, from the Perth base case, on the tool's own engine.

• The answer rests on four guesses about the future: house price growth, how long you stay, rent growth, and the gap between the savings rate and the mortgage rate. A point on a rate, or five years on the horizon, moves it by $150k to $500k.
• Apart from the rent, the figures you can look up matter far less. Price, deposit, term, running costs, duty and selling costs each move it by less than $50k here. Spend your time on the guesses.
• Growth cuts both ways, unevenly. A point more adds more than a point less takes away: compounding over 30 years.
• No single move flips this case. Owning stays ahead in every row, but the breakeven is year 5: sell sooner and the setup and selling costs leave renting ahead.

What it leaves out

What the answer rests on, beyond the figures you enter. What this assumes, under the results, lists the ones your plan uses.

• No tax. None on the gain when the home is sold, none on the interest savings earn, no land tax or rental deductions unless you put them in the running costs.
• One growth rate, every year. No cycles, no crash, no boom. Your home is one property, not the index its growth came from.
• The renter's savings earn the Risk-Free Rate. Savings in shares would earn more on average, with risk the tool does not model.
• The home is sold at the horizon. Net equity takes off the selling cost each year. If you would stay on, that cost is never paid.
• The loan is plain. No refinancing, offset account, extra repayments, lender's mortgage insurance or fees beyond the setup cost. A floating rate runs at the middle of its range.
• Rent is renewed forever at rent growth, with no forced moves beyond the renting costs.
• A shortfall is carried, not borrowed. If a set budget or cash runs a path below zero, its cash line goes negative and the page warns you; the mortgage is the only loan.
• Two rates, two conventions. The repayment uses the mortgage rate ÷ 12, as lenders quote it; savings compound monthly to exactly the Risk-Free Rate over a year.
• Quick Start figures are local estimates as of the month shown, with sources on the Quick Start assumptions page. General inflation stays at 2.5% for every city: set your own.

Do not lean on it when you may sell near the breakeven year, you cannot defend your growth figure within a point, an interest-only balance falls due that your savings cannot cover, or you compare homes in two currencies without thinking about the exchange rate path.

This guide and the tool are general information, not financial advice. Check the figures that matter to you, and talk to a licensed adviser before you buy.