Rent, or rather buy and build?

Rent or buy: why gut feeling is rarely the best advisor

"Rent is money thrown away" — hardly any sentence comes up as often on the subject of housing and is checked so rarely. In truth, the question of whether buying or renting pays off more is one of the trickiest calculations in private life. It hinges on about a dozen variables: the purchase price, the equity, the interest rate, the repayment, the rent level, the expected rent increase, the value development of the property — and how long you actually stay in the home. This calculator does the number-crunching for you and makes the scale of the decision visible, so that you decide not on gut feeling but based on figures.

Fairness is at the heart of the comparison. The buyer ties up equity, pays a financing instalment and builds wealth over the years in the form of the property — reduced by the outstanding remaining debt. The renter, by contrast, pays a net cold rent, which is usually below the buyer's instalment. So that the comparison stays honest, the model assumes the renter does not spend this difference but consistently invests it on the capital market — in the example at 5 percent return per year, as a broadly diversified equity portfolio has historically achieved over the long run. In addition, the renter invests the equity that the buyer put into the property. Only this turns "renting versus buying" into a genuine comparison of wealth against wealth.

The break-even year: the point at which buying pays off

The break-even year is particularly telling. In the first years, the renter often leads in the model: the buyer has tied up a lot of capital, initially pays almost only interest, and the property gains value only slowly. Year by year, however, the remaining debt shrinks while the property value rises — and at some point the two curves cross in the chart. That very intersection is the break-even year: from here on, buying has paid off financially compared to renting-and-investing. Move the sliders and see how far this point shifts: just one percentage point more appreciation or a stronger rent increase can bring the break-even forward by many years.

Conversely, this means: if purchase prices are very high relative to the comparison rent, appreciation is low and the time horizon is short, renting-and-investing may stay ahead financially — then simply no break-even exists in the chosen scenario. That does not argue against owning a home, but calls for an honest calculation. How the financing side behaves in detail is shown to you by the mortgage calculator, which breaks down the monthly instalment, interest portion and remaining debt year by year.

What the calculator leaves out — and why that matters

Every model simplifies, and this one does so deliberately, to bring out the core of the decision. Not taken into account are reserves for maintenance and modernisation that fall to the owner, nor ongoing incidental costs, the property tax (Grundsteuer) or the purchase incidental costs in detail. On the other hand, the model also does not capture that renting carries the risk of an owner-occupation termination (Eigenbedarfskündigung) or unexpectedly rising rents. And it cannot put the emotional value into numbers: the security of living in your own house, the freedom to design it to your own taste, and independence from the landlord's decisions. These points belong in your consideration just as much as the bare figures.

Therefore understand the result as well-founded guidance, not as a final verdict. Anyone who wants to dig deeper into the current conditions and interest developments will find in the guide Construction financing 2026 the complete guide from the equity ratio to the repayment plan. Long-term data on the price development of residential property is provided by the Deutsche Bundesbank.