What owners pay and don’t get back
Only the part of a mortgage payment that repays the loan builds wealth. These don’t:
| Cost | Roughly, each year |
|---|---|
| Mortgage interest | Most of each payment in the early years |
| Repairs and maintenance | Often 1% or more of the value |
| Buildings insurance | Varies, and is required by your lender |
| Service charge and ground rent (leasehold) | Can be thousands a year in a flat |
| What the deposit could earn | The return you give up by not investing it |
Buying also has one-off costs: Stamp Duty (or LBTT in Scotland and LTT in Wales), solicitor’s fees, searches, a survey, mortgage fees and moving. Selling adds estate agent fees. Council Tax you pay either way.
First-time buyers in England and Northern Ireland pay no Stamp Duty on the first £300,000, which helps. See Stamp Duty for first-time buyers.
A rule of thumb
A quick comparison: the costs of owning that you don’t get back come to roughly 4% of the home’s value a year in the UK (about 1% for repairs and 3% for the cost of the money tied up, through interest or lost investment returns), plus any service charge.
Example: a £300,000 home
4% of £300,000 is £12,000 a year, or about £1,000 a month. If you could rent a similar home for less, renting may cost less, as long as you invest what you save.
It’s a rough guide: mortgage rates, rents and prices vary a lot across the UK. The rent vs buy calculator works it through with your own numbers, including Stamp Duty and repairs.
What renters should do to come out ahead
Renting only wins if the money you’d have spent on owning is saved or invested, not spent:
- Invest the difference each month, in a Stocks and Shares ISA (up to £20,000 a year, tax-free) or your pension.
- Save a deposit in a Lifetime ISA if you might buy later: the government adds 25%, up to £1,000 a year.
- Keep your deposit protected: in England, Wales, Scotland and Northern Ireland, landlords must put your tenancy deposit in a government-approved scheme.
When buying makes more sense
- You’ll stay for years, long enough to earn back the costs of buying and selling.
- You want stability: no rent rises or being asked to move, and with a fixed-rate mortgage, payments you can plan around.
- You’d never invest the difference. Repaying a mortgage is a forced saving plan, and that’s a real benefit.
- Your rent is high for the area compared with what owning a similar home would cost.
Bottom line
Rent pays for a home to live in, just as an owner’s interest and repairs do. Compare the full costs, not rent against the mortgage payment. How much can I borrow? shows what buying would cost each month, and the first-time buyer guide walks you through the steps.