Illustrative calculation, not market research. These are chosen teaching inputs, not current mortgage offers, local prices, investment forecasts or a real household’s experience.
First hold the house and household constant
The buyer pays $400,000 with $40,000 down, a 30-year loan at 6.4%, and $12,000 buying costs. The renter pays $2,400 a month, rising 3% each year. The owner enters $4,800 annual property tax, $1,800 insurance and $4,000 maintenance; HOA is zero. The home-value assumption is 3% yearly and selling costs are 6% of sale value. These are nominal-dollar scenarios.
To isolate opportunity cost, this case sets PMI, renter insurance and ownership-overhead growth to zero. Those are not claims that real households pay nothing. The interactive model lets you replace all three. Utilities, renovations, moving costs and tax deductions remain excluded.
Two measures, two different questions
| Measure | Calculated result |
|---|---|
| Rent payments | $152,903.11 |
| Net buying cash cost after sale | $140,831.48 |
| Cash-cost advantage for buying | $12,071.63 |
| Buyer sale equity | $99,277.79 |
| Renter investments at 4% net return | $102,488.25 |
| Wealth advantage for renting | $3,210.45 |
Net buying cost subtracts sale proceeds after selling costs and the remaining mortgage. It answers how much cash housing consumed. It does not credit the renter for retaining and investing the $52,000 that the buyer used at purchase, or for investing subsequent monthly savings.
Make the investment comparison symmetric
At month zero, the renter invests the same $52,000 used for down payment and buying costs. Both households then have the same available monthly housing budget. If ownership costs more that month, the renter invests the difference. If rent costs more, the buyer invests the difference. Existing portfolios grow first; new contributions arrive at month-end. The owner’s final amount includes signed sale equity plus any investments.
The 4% assumption is an effective annual return after assumed fees and taxes, converted to monthly growth with (1.04)^(1/12) − 1. It is deliberately a smooth mathematical scenario. A short holding period can expose actual investments to losses; the SEC’s time-horizon and risk guidance explains why this is not an instruction to invest a house deposit in risky assets.
Observe the transition instead of quoting one break-even rule
| Year | Renter portfolio | Buyer equity + portfolio | Buyer minus renter |
|---|---|---|---|
| 1 | $63,062.44 | $31,380.76 | -$31,681.69 |
| 2 | $73,687.66 | $47,370.20 | -$26,317.46 |
| 3 | $83,831.76 | $63,996.30 | -$19,835.46 |
| 4 | $93,448.32 | $81,288.49 | -$12,159.83 |
| 5 | $102,488.25 | $99,277.79 | -$3,210.45 |
| 6 | $110,899.63 | $117,996.87 | $7,097.25 |
| 7 | $118,627.62 | $137,480.15 | $18,852.54 |
| 8 | $125,614.28 | $157,763.91 | $32,149.63 |
| 9 | $131,798.46 | $178,886.40 | $47,087.94 |
| 10 | $137,115.60 | $200,887.96 | $63,772.36 |
Changing the stay length changes transaction-cost exposure, loan balance, rent and invested balances simultaneously. The first positive year is only the first tested year-end, not a precise crossover month or a promise that buying stays ahead.
Stress-test the return, not only the home value
| Annual net investment return | Buyer minus renter |
|---|---|
| 0% | $12,071.63 |
| 4% | -$3,210.45 |
| 7% | -$16,153.94 |
At zero investment return, the wealth difference equals rent costs minus net buying costs. That reconciliation is an automated regression test. It checks the accounting convention, not the truth of future appreciation or returns.
The CFPB homeownership checklist provides context for transaction costs, maintenance and ownership risk. It does not endorse this model or these assumptions.
Reproduce and change the case
Load this 10-year housing case
Start by changing one uncertain input: a shorter stay, flat home values, a lower investment return or rising ownership overhead. Keep affordability separate: the financially higher ending balance does not establish that a household can cover the monthly bills. Use the cash-flow worksheet and cash-to-close tool for those questions.
Calculation record and corrections
Methods, model boundaries and test cases are recorded in the October 31 calculation specification. Send a reproducible discrepancy, the page and the input values to contact@mycalcvault.com; do not send confidential account records.
MyCalcVault is not a bank, lender, broker, accounting firm, law firm, or licensed advisory practice. The content is educational and general. It is not individualized financial, investment, legal, or tax advice.