How much of your mortgage payment is a cost
The whole payment leaves your account, but part of it repays debt and stays with you as equity. To compare with renting, separate what is a cost from what is saving.
How much of your mortgage payment is a cost and how much is saving
Enter your outstanding balance, rate and years remaining, the other costs of owning and the cash you put in yourself. The calculator splits first-year interest (a cost) from principal (saving) and gives you the real monthly cost of owning, compared with rent.
Example: with 160,000 at 3% over 25 years, the payment is 758.74. In the first year, 4,740 is interest and 4,365 repays debt. Adding 1,500 of other costs and the 1,080 your 54,000 of cash could have earned (at 2%), owning costs 610 a month: 290 less than a rent of 900.
How it is calculated
- Over the first year of payments: interest = cost; principal = debt you repay (it becomes equity).
- Real cost of owning = interest + other annual costs (property tax, insurance, service charges, maintenance) + opportunity cost of the deposit.
- Opportunity cost = deposit × the return that money could earn elsewhere.
Assumptions
- First year of the loan: over time interest falls and principal rises.
- Does not include house price growth or any country's taxes or tax relief.
Frequently asked questions
Is a mortgage payment a cost?
Only partly. Interest is a cost, but the principal you repay reduces your debt and stays with you as equity. That is why comparing the payment directly with rent is misleading.
What other costs come with owning?
Property tax, insurance, service charges and maintenance. Tenants usually do not pay them, so they must be added for a fair comparison.
What is the opportunity cost of the deposit?
What the cash you put into the purchase could earn elsewhere. In the example, 54,000 at 2% is 1,080 a year you give up.
Why only the first year?
Because it is today's picture. Over time each payment contains less interest and more principal, so the real cost of owning falls.
So is buying better than renting?
This calculator compares today's monthly cost. The decision also depends on how long you will stay, how house prices move and the costs of buying and selling, which it does not include.