Two identical front doors. One home rents for $2,000 a month. The other costs $400,000 to buy. With a 20% deposit and an illustrative 6% mortgage over 30 years, the loan repayment is about $1,919 a month.
So buying is $81 cheaper every month, right?
Not quite. That mortgage quote is only part of the bill. Let's turn over the receipt.
A cheaper mortgage doesn't always mean cheaper housing
Add a hypothetical $500 a month for ownership expenses such as insurance, property taxes, building fees and maintenance. The buyer now pays about $2,419 a month in total cash outflow—roughly $419 more than the renter. There's also the $80,000 deposit and any purchase fees to find upfront.
But here's the twist: not every dollar of a mortgage repayment is a cost you'll never recover.
In the first month, approximately $1,600 goes to interest and $319 reduces the loan balance. That $319 helps build home equity; the interest doesn't. Equity can also rise or fall with the property's market value.
Rent isn't automatically “money thrown away,” either. It buys somewhere to live without requiring you to purchase the property or handle most major repairs. The Consumer Financial Protection Bureau's homebuying guidance explains the additional responsibilities and ongoing costs of ownership.
The question that can change the answer: when will you move?
Buying and selling a home can mean paying fees twice. If you leave after just a few years, those costs have less time to spread out. The CFPB also cautions that moving again soon can make purchasing risky and expensive.
Choose how long you stay. This simplified comparison shows rent paid versus the buyer's interest, running costs and assumed buying-and-selling fees—not the full change in either person's wealth.
With our example prices held flat, a three-year stay means roughly $72,000 in rent, versus $102,537 in non-recoverable ownership costs. At 20 years, the simplified totals reverse: $480,000 in rent versus around $461,266 in ownership costs.
Those aren't universal break-even points. The illustration ignores changes in house prices, rent, interest rates, taxes and what either person could earn by investing their spare cash.
And what happens to that $80,000 deposit?
A deposit isn't an ownership fee: it's money converted into a stake in the property. But you can't usually spend it freely while it's tied up in your home.
A renter could instead keep that money available or invest some of it. Whether that works out better depends on returns, risk and the difference between renting and owning costs. The Reserve Bank of Australia's housing-cost research includes the opportunity cost of tied-up money when comparing the two choices.
For a fuller savings experiment, try the CozyCalcs compound savings calculator. Returns are never guaranteed.
So, should you rent or buy?
Renting may suit you better if flexibility matters, you might move soon or ownership would stretch your budget. Buying may suit you better if you expect to stay, can handle repairs and upfront costs, and value the stability of having your own place.
Use the rent affordability calculator to check what fits your pay, the home loan calculator to explore repayments, and the budget calculator to see what remains for the rest of life.
The cheaper home isn't always the one with the smaller monthly payment. It's the one whose total trade-offs fit your life.
All figures are illustrative, not market averages or financial advice. They use the same currency throughout, assume a principal-and-interest mortgage at a constant rate, and exclude country-specific tax relief, subsidies and legal requirements. The interactive examples are simplified educational comparisons, not predictions.