Rent vs Buy Calculator Australia

It estimates what you would own, less what you would owe, after the number of years you choose on two paths: buying this home to live in, or renting a comparable home and investing the money you would otherwise have put into buying. The buying path is the property value, less what it would cost to sell it at that point, less the loan balance, plus any money the buyer has invested. The renting path is the renter's investments. The result is an estimate under the assumptions you enter. It is not a recommendation to buy or rent, and it does not measure anything that is not money, such as security of tenure or the freedom to move.

Part of each repayment is interest, which is a cost, and part is principal, which pays down the loan. Paying down the loan does not make you poorer: it moves money from your pocket into equity in the home, and the lower loan balance appears on the buying side. So interest, stamp duty, buying costs, rates, insurance, strata, maintenance and selling costs are counted as costs, and principal is not.

Both households are assumed to spend the same money each month. In months when owning costs more than renting, the renter invests the difference. In months when owning costs less, for example once rent has risen past the loan repayment or after the loan is repaid, the buyer invests the difference. The renter also invests, from day one, the cash the buyer would have put into the deposit and buying costs. If you would spend the difference rather than invest it, you would end up with less than the projection shows, whichever path you are on.

Property growth has more effect on the result than any other assumption, and no one knows what a particular home will be worth in future. calx does not supply a forecast or a default. Until you choose a rate to test, the calculator shows the growth rate at which buying and renting come out equal over your chosen number of years, and a table of results at 2%, 4% and 6% a year. You can choose 2%, 4% or 6%, or enter your own rate, including zero or a fall in value.

Enter the return you want to test on money that is not spent on the home, after tax and investment costs and before inflation, as a percentage a year. calx does not suggest a figure, and nothing is calculated until you enter one. It is a hypothetical modelling assumption and does not represent or recommend any particular investment or expected future return. Tax on investment returns depends on what you invest in, when you sell and your other income, so calx does not work it out for you: it uses the after-tax figure you enter for both the renter and the buyer. A return from a savings account is usually taxed in full each year, while shares held for more than a year may attract less tax. The sensitivity table shows the result with the return 2 percentage points lower and higher.

Stamp duty comes from the calx stamp duty calculator for your state or territory, as an owner-occupier, including any first home buyer concession, which is applied on the conditions you are shown. Conveyancing ($1,500) and a building and pest inspection ($600) are labelled starting assumptions you can change. Registration, settlement and lender fees are not estimated and are $0 unless you enter them. All of these are paid from the cash you enter, and what is left is your deposit. Lenders mortgage insurance is not estimated: if the loan is more than 80% of the price, enter the premium from your lender, or 0 if it does not apply, and it is added to the loan.

Yes. The buying path is valued at every point as if the home were sold then, less agent commission (2.2% of the value including GST to start) and any other selling costs you enter (not estimated by calx; $0 unless entered, grown with the inflation rate). Leaving selling costs out would overstate the Buy estimated net position compared with the money you could actually get out of the home. Stamp duty is a buyer's cost and is never counted as a selling cost.

No, because the comparison assumes the home is your main residence for the whole time. A home that is always your main residence is generally exempt from capital gains tax, and your principal place of residence is exempt from land tax in the states and territories that charge it. If you plan to rent the home out, use it for a business or buy it as an investment, this comparison does not cover it. The capital gains tax calculator covers the tax side of selling a property.

It holds the home loan rate constant and does not model offset accounts, extra repayments, refinancing, fixed rate periods, renovations, the rental bond, moving costs, contents insurance, foreign purchaser duty, first home grants or government deposit schemes. Returns and growth are smooth and constant each year, which real markets are not, and no particular investment is modelled. The results page lists each limitation and which way it would move the estimate. This calculator is for general information only and is not intended to be relied on for the purposes of making a decision about a financial product. Consider obtaining advice from an Australian financial services licensee before making a financial decision.

Future dollars are the estimated amounts in the year shown, before allowing for inflation. Today's dollars divide each amount by one plus inflation for every year, to show roughly what it would buy now. The default inflation rate is 2.5% a year, the middle of the Reserve Bank's 2 to 3% target; you can enter another rate, and actual inflation may differ. Both are shown with every result. The same inflation rate is also used to grow the costs the model links to inflation: council and water rates, building insurance, strata and other selling costs.