Is renting really throwing money away?

No more than mortgage interest is. In the example above, the interest alone is 1,333 a month in year one — close to the 1,500 rent. What renting genuinely costs you is the equity you would have built, which in the first five years is 36,543, not the full 112,241 paid.

How long do I need to stay for buying to win?

Usually five years or more, because transaction costs of 5–8% have to be recovered before ownership shows any advantage. The exact break-even depends heavily on price growth, which is precisely the number nobody can promise you.

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Rent versus buy, and why it is closer than it looks

Buying feels obviously better because rent is money you never see again. But a large share of an early mortgage payment is interest — also money you never see again — and the deposit could have been earning elsewhere. Once both sides are counted honestly, the comparison is usually close.

How it works

Totals the true monthly cost of owning: mortgage, maintenance, insurance and property tax.
Compares it against rent plus the return the deposit would have earned if invested instead.
Separates the part of the mortgage that builds equity from the part that is simply a cost.

owning  = mortgage + maintenance + insurance + tax
renting = rent + opportunity cost of the deposit

of the mortgage payment, only the capital portion is saving;
the interest portion is a cost exactly like rent

maintenance rule of thumb: 1% of property value per year

Worked example

A 400,000 property with a 20% deposit, 5% over 25 years, against renting the equivalent at 1,500 a month.

deposit 80,000, mortgage 320,000
monthly payment = 1,871
maintenance at 1% a year = 333 a month
total owning cost = 2,204 a month, against 1,500 rent
over the first five years: 75,698 paid in interest, 36,543 in capital

Owning costs 704 more a month. Of the 112,241 paid into the mortgage over five years, only 36,543 became equity — the rest is interest, which is as gone as rent. Meanwhile the 80,000 deposit would have grown by about 22,103 at 5% elsewhere.

Reading the result

Only the capital portion of a mortgage payment is saving. In year one of the example, 1,333 of the 1,871 payment is interest. Comparing the whole payment against rent flatters buying enormously.
The deposit has an opportunity cost. 80,000 sitting in a house is 80,000 not invested, and over five years at 5% that is roughly 22,000 of forgone return — a real cost that never appears on a mortgage statement.
Transaction costs punish short stays. Stamp duty, legal fees, survey and agent fees on the way out commonly total 5–8% of the price. Buying and selling within three years often loses money regardless of what prices do.
House price growth is the variable that decides it, and nobody knows it in advance. The honest version of this calculation shows the answer under several growth assumptions rather than picking one.

Common questions

Is renting really throwing money away?: No more than mortgage interest is. In the example above, the interest alone is 1,333 a month in year one — close to the 1,500 rent. What renting genuinely costs you is the equity you would have built, which in the first five years is 36,543, not the full 112,241 paid.
How long do I need to stay for buying to win?: Usually five years or more, because transaction costs of 5–8% have to be recovered before ownership shows any advantage. The exact break-even depends heavily on price growth, which is precisely the number nobody can promise you.