Buying comes out ahead
$0
Cash to buy
$0
Buy net worth
$0
Rent net worth
$0
Net worth over time
Buy
Rent
It is not just about the monthly payment. This compares your net worth down the road for each path, including what your down payment could earn if you invested it instead.
Monthly payment ignores that a down payment could have been invested, that part of a mortgage payment builds equity, and that selling a home costs money. Comparing net worth after a set number of years captures all of it.
It is the year at which buying overtakes renting in total net worth. Before that point the upfront costs of buying have not been recovered yet. It commonly lands somewhere between year five and year ten.
No. Since the standard deduction rose, most households no longer itemize, so including it would overstate the case for buying for most people. Leaving it out keeps the comparison conservative.
Set the appreciation rate to zero or to a negative number. Because a mortgage is leveraged, small changes in home value have an outsized effect on your net worth.
How this works: both paths start with the same cash. The renter invests the buyer's down payment and closing costs, and each month whoever pays less invests the difference at your investment return. We then compare ending net worth: the buyer's home equity (after selling costs) plus any side investments, versus the renter's portfolio. Mortgage-interest tax deductions are not included. Estimates for education only; this is not financial advice.