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⚠️ Simplified estimate. Does not include tax benefits, insurance variations, or local regulations. Not financial advice.
How rent vs buy calculations work
A rent vs buy calculator compares the total cost of renting versus the total cost of owning over the same time horizon, accounting for opportunity cost of capital. The mistake most amateur comparisons make is comparing "rent payment" to "mortgage payment" — that's an incomplete picture.
The real cost of owning includes: mortgage interest, property taxes/rates, insurance, maintenance (~1% of property value/year), body corporate or HOA fees, opportunity cost of the deposit (what it could have earned invested), and transaction costs on entry and exit. The real cost of renting is just rent + renter's insurance, but the deposit you didn't spend can be invested instead.
The buy-side variables most people miss
- Maintenance: the long-term average is 1–2% of property value per year. A $800,000 home costs $8,000–16,000/year to maintain on average — sometimes near zero, sometimes a $40,000 roof replacement.
- Property rates / council rates: in NZ, typically $2,500–4,500/year. In AU, council rates plus land tax in some states. In the US, property tax can be 1–3% of value annually.
- Body corporate / HOA fees: for apartments and townhouses, can run $3,000–10,000/year.
- Insurance: $1,500–3,000/year for buildings + contents.
- Transaction costs: typically 2–4% of price to buy (legal, inspections, conveyancing) and 3–6% to sell (agent commissions). On a $800k property, that's $40k–80k in round-trip costs alone.
- Mortgage interest in early years: in years 1–10 of a 30-year mortgage, the vast majority of each payment goes to interest, not principal. You're "renting money from the bank" before you build meaningful equity.
A worked example
Auckland: $800,000 home with 20% deposit ($160,000), 6.5% mortgage, 30-year term, vs renting equivalent for $750/week ($39,000/year).
Buy (5 years): Mortgage payments ~$232k (interest ~$200k of that), rates $15k, insurance $10k, maintenance $40k, transaction costs $50k. Total cost: ~$347k. Equity built: ~$72k. Net cost: ~$275k over 5 years.
Rent (5 years): Rent $200k, plus $160k deposit invested at 6% returns ~$54k. Net cost: ~$146k.
Difference at 5 years: renting is ~$129k cheaper. Break-even on this scenario is typically 7–9 years, depending on house price growth.
The big variable is assumed house price growth. If Auckland appreciates 4%/year, buying breaks even faster. If it appreciates 0–2%, renting wins for longer. The honest answer: nobody knows future house price growth.
When buying tends to win
- Time horizon of 7+ years (transaction costs and slow equity build dominate shorter periods)
- Stable life situation — career, relationship, location confidence
- Strong rental market (high rents relative to prices makes ownership economically competitive)
- Below-average mortgage rates relative to long-run history
- You'd otherwise overspend on lifestyle inflation rather than investing the deposit
When renting tends to win
- Time horizon under 5 years
- Job or family situation likely to change
- Property prices high relative to rents in your area (price-to-rent ratio above 25)
- You can and will reliably invest the equivalent of the deposit + maintenance differential
- Career flexibility worth more than ownership stability
The non-financial side
Pure financial calculators miss real factors that often matter more than the numbers: stability for kids and schooling, freedom to renovate, security of tenure, the discipline of "forced savings" that mortgage payments create, the cost of moving every few years as a tenant. Run the financial comparison, but don't pretend it's the whole picture.