The American Dream usually involves owning a home, but from a purely financial perspective, renting and investing the difference can sometimes yield higher returns. This decision depends on interest rates, home appreciation, and market returns.
Our calculator runs a complex “Opportunity Cost” analysis over 30 years to tell you which path builds more wealth: paying a mortgage and building home equity, or renting and investing in the stock market.
It compares Net Worth.
Scenario A calculates the future value of your home after the mortgage is paid off.
Scenario B assumes you rent and take the difference between the mortgage payment and rent (plus your down payment) and invest it in the S&P 500.
It then compares the final totals.
Reverse calculation.
If you are comfortable paying $2,500 in rent, this mode calculates how much loan that same monthly payment would cover.
It helps you understand your purchasing power based on your current cash flow.
Implicitly. While this tool focuses on the core financial trade-off (Loan vs. Investment), remember that homeowners pay property taxes, HOA fees, and maintenance (approx. 1-2% of home value/year).
Renters do not. If the results are close, Renting is often the safer financial bet due to these hidden costs.
Not necessarily. Buying a home provides stability, customization, and emotional value that a calculator cannot measure.
Use this tool to understand the financial cost of that lifestyle choice, not just to dictate your life decisions.
1. Opportunity Cost Analysis:
Most people forget that the “Down Payment” could have been invested. Our tool assumes that if you don’t buy, you invest that cash lump sum. This gives a much fairer and more realistic comparison of wealth building.
2. US Mortgage Logic:
We use the standard US mortgage amortization formula (APR / 12), ensuring the monthly payment calculations align with what you would see from a bank like Wells Fargo or Chase.
3. Instant “What-If” Scenarios:
Markets change. What if interest rates drop to 5%? What if the stock market returns 10%? Adjust the variables in real-time to see how sensitivity to market conditions flips the verdict between Buying and Renting.
💡 Pro Tip: The “Break-Even Point” usually happens around year 5 or 7. If you plan to move within 5 years, renting is almost always cheaper due to the high “Closing Costs” (6-10%) involved in buying and selling a home.