Rent or buy: compare sale equity and invested differences

Make the initial cash and monthly funding comparable

Buying starts with down payment plus one-time net acquisition costs. Renting starts with nonrefundable charges plus a deposit that is assumed returned later. Both alternatives receive the larger of those starting amounts, and each invests its own unused cash. A reserve held equally outside both scenarios does not affect this comparison.

Each month, the option with lower housing outflow invests the difference. This assumes you actually preserve and invest that money; spending it elsewhere changes the result. A positive wealth difference favors buying only within these entered assumptions.

Count equity, maintenance and sale costs once

The mortgage charges monthly interest on opening balance, rounded to cents; regular payments are rounded and the last payment clears the remaining balance at the term. Home value follows the entered annual growth. At each comparison date, selling charges and the outstanding loan are deducted from the hypothetical sale value.

Mortgage principal is a cash outflow but not an additional nonrecoverable expense. It is already reflected in the lower balance owed at sale. Maintenance is paid as a cost and creates no automatic extra sale value. One-time repairs belong only in buying costs; recurring upkeep belongs only in its own field.

Read the yearly and value sensitivities as assumptions

Tax, home insurance, upkeep and HOA share one annual expense-growth assumption, applied each anniversary. Rent and renter insurance use their separate shared assumption. Mortgage insurance stays fixed until the loan is paid off. Property taxes are not automatically tied to home appreciation.

Investments compound at the monthly equivalent of the constant effective annual net return, with contributions at month end and unrounded intermediate investment balances. The annual table assumes a separate sale in each row; those sale charges are not accumulated. The home-value table varies growth by two percentage points within minus 20 to plus 20 percent, holding other inputs fixed.

Use documents to replace the fictional defaults

Use comparable properties, written loan terms, local tax and insurance estimates and the actual lease. Input recurring costs net of items already included elsewhere. Refundable escrow and prepaid recurring costs are omitted from this wealth model to avoid counting them again; the purchase-cash tool handles upfront liquidity separately.

Mobility, stability, property condition, accessibility, location and available cash can outweigh a modeled dollar difference. HUD describes independent counseling and online search. No current rates, market averages, guaranteed appreciation or minimum required down payment are supplied.

Official sources

• CFPB — Loan Estimate explainedSources checked: 2026-09-09
• CFPB — principal, interest and total housing paymentSources checked: 2026-09-09
• CFPB — plan the down payment and a cushionSources checked: 2026-09-09
• HUD — housing counseling and online searchSources checked: 2026-09-09
• Investor.gov — investment riskSources checked: 2026-09-09

Continue with a useful next step

• Check purchase cash and reserve separately
• Compare two fixed-rate mortgage offers
• Build a down-payment saving plan