A mortgage is a way to finance buying a home. “Buying versus mortgage” mixes the asset decision with the financing decision. Start by asking whether you mean rent versus buy, or buying with cash versus borrowing.
Compare like with like
Set a time horizon and compare similar homes. For the buying case, list the deposit, interest, purchase and sale costs, maintenance and any ongoing ownership charges. Principal repayments reduce the loan and build equity; they are not the same kind of cost as interest.
For the renting case, list rent, rent changes, moving costs and what happens to the money that would otherwise have been used for the deposit and purchase costs. An assumed investment return is uncertain, just as an assumed house-price increase is uncertain.
If you expect to move after two years, transaction costs can matter much more than over twenty years. Flexibility, job uncertainty and maintenance responsibility also belong in the decision.
Try explaining it
Can you compare £1,200 rent with a £1,200 mortgage payment and conclude that buying costs the same?
Reveal the worked answer
No. The mortgage payment includes principal as well as interest, while ownership brings other costs and risks. A meaningful comparison includes cash flows, ending equity and the alternative use of the deposit.
This is a comparison framework, not a recommendation to rent or buy. Taxes, eligibility and transaction rules require current local sources.
Compare the same time horizon
A mortgage payment includes interest and principal. Principal repayment builds equity but still requires monthly cash. Ownership also brings maintenance, insurance and transaction costs. A fair comparison includes the return forgone on the deposit and the value of flexibility.
Check your understanding
A monthly repayment is £1,500: £900 interest and £600 principal. Is £1,500 the economic cost of the loan that month?
See the worked answer
No. £900 is interest; £600 reduces debt. Both require cash, but principal repayment changes the balance sheet. Maintenance, transaction costs and other ownership costs remain separate.
Your next step
Make two columns covering the same holding period: cash needed upfront, recurring costs, exit costs and assets/debts at the end. Test a lower sale price as well as higher mortgage rates.
MoneyHelper: Buying a home (further reading). Reviewed 14 October 2026. Worked examples and exercises are original illustrations; no current market prices are used.