Rent vs Buy

There is no universal answer — it depends on your personal circumstances, how long you plan to stay, and the specific suburb. As a general guide: if you plan to stay in the same location for less than 5 years, renting often comes out ahead because the upfront costs of buying (stamp duty, conveyancing, inspection) are large and take years to recover. If you plan to stay for 7 years or more, buying typically builds more wealth due to property appreciation and debt reduction. Use the calculator above with your specific numbers to find your personal break-even year.

Opportunity cost refers to what your deposit money could have earned if you invested it elsewhere instead of using it to buy a home. For example, a $200,000 deposit invested in a diversified share portfolio returning 7% per year would grow to approximately $394,000 over 10 years. This is the "opportunity cost" of buying — the returns you give up by locking your money in property rather than financial assets. The rent vs buy calculator models this by assuming the renter invests their deposit (plus any monthly savings) in shares at your specified rate of return.

For a typical Melbourne house purchase (around $900,000) with a 20% deposit, the break-even point where buyer equity overtakes renter investment wealth is typically 6–10 years under moderate assumptions (5% property growth, 7% share returns). The break-even point shifts earlier if property grows faster than assumed, or later if share returns outperform. Inner suburbs with higher entry prices and lower rental yields tend to have longer break-even periods. Outer suburbs with lower prices relative to rent often break even sooner. The calculator shows you the exact year for your specific inputs.

Beyond the deposit, expect to pay: stamp duty (see the stamp duty calculator — on a $900k property this is approximately $49,000); conveyancing fees ($1,100–$2,100 all-in); building and pest inspection ($400–$700 per property inspected); loan application fees ($0–$600 depending on lender); and Lenders Mortgage Insurance (LMI) if your deposit is below 20%, which can add $8,000–$20,000+. On a $900,000 purchase with a 20% deposit, total upfront costs excluding LMI are typically $52,000–$55,000 on top of the deposit.

Melbourne's long-run median house price growth has averaged approximately 5–7% per year over the past 30 years, though there is significant variation by decade and suburb. The 2010s saw strong growth of 8–10% annually in many inner suburbs; the 2020s have been more uneven with rate rises suppressing growth in 2022–23. A conservative but realistic assumption for planning purposes is 5% per annum. More speculative assumptions (8–10%) can make buying look far more favourable than it may turn out to be — be cautious about using bullish growth estimates to justify a purchase.

Use the advertised interest rate (also called the base rate or headline rate) for monthly repayment calculations, as this is the rate applied to your outstanding balance. The comparison rate is a standardised figure that includes fees and charges expressed as a single annual percentage — it is useful for comparing loans but not for calculating actual monthly repayments. In the rent vs buy calculator, enter the interest rate you expect to actually pay on your loan. If you are pre-approved, use the rate on your approval letter. If estimating, the current average variable rate in Australia is around 6.0–6.5% as of mid-2025.

Buying with less than a 20% deposit is possible but comes with additional costs. With a deposit below 20%, lenders require Lenders Mortgage Insurance (LMI) — a one-off premium that protects the lender (not you) if you default. LMI on a $900,000 property with a 10% deposit ($90,000) typically costs $18,000–$22,000. It can be capitalised into the loan, increasing your debt. The calculator's "Other buying costs" field is a good place to include LMI if it applies to you. Some lenders offer LMI-free loans at 85% LVR for medical professionals or with a family guarantee — ask your mortgage broker.

No — this calculator is designed for owner-occupiers comparing the cost of living in a property you buy versus renting elsewhere. It does not model investment property scenarios where you would receive rental income to offset your mortgage costs. For investment property analysis, the key metric is rental yield (annual rent ÷ property price) compared to your mortgage rate and other holding costs. Melbourne's gross rental yields for houses are typically 2.5–3.5%, which is below most mortgage rates — meaning most Melbourne investment properties are negatively geared and rely on capital growth for their return.