Opportunity Cost
Should you invest your down payment instead of buying a home?
A down payment isn't free money you're 'putting into' a house — it's cash that stops earning a return anywhere else. Here's how much that opportunity cost actually is, at different investment-return assumptions, for the same $750K home.
Educational estimate only, not investment advice. No specific investment return is guaranteed — these are assumptions to compare, not a forecast.
The idea
Buy a condo vs. rent + invest $168,750
Every rent-vs-buy comparison on this site assumes the renter invests what the buyer would have spent on a down payment and closing costs, plus whatever renting costs less than owning each month. The question is: at what rate does that invested money grow?
The buyer's $168,750
Down payment plus closing costs goes into the home. It becomes equity — recovered later through appreciation, minus the mortgage balance and a selling cost, if and when the home is sold.
The renter's $168,750
Stays liquid and invested from day one, then keeps growing every year at whatever return you assume, plus new contributions from the monthly gap between renting and owning.
Same home, five return assumptions
At a conservative 3%/yr return, buying actually wins by year 13
Home price $750,000, 20% down, 6.25% rate, $400/mo HOA (the condo case), $3,000/mo starting rent, 4%/yr appreciation, 3%/yr rent growth, 6% selling cost — everything held constant except the assumed investment return.
| Investment return | Year-10 difference (buy − rent+invest) | Note |
|---|---|---|
| 3%/yr | -$29,653 | A conservative, bond-like assumption — buying actually pulls ahead by year 13. |
| 5%/yr | -$119,839 | Below the long-run stock market average. |
| 6%/yr | -$170,231 | This calculator's default assumption. |
| 7%/yr | -$224,498 | Close to the S&P 500's long-run historical average. |
| 9%/yr | -$345,786 | An optimistic, higher-risk assumption. |
A negative number means renting and investing is ahead by that amount at year 10. At 6%/yr or higher, renting and investing stays ahead. At a more conservative 3%/yr, buying is only slightly behind at year 10 — and pulls ahead entirely by year 13.
What this doesn't capture
Investing isn't risk-free, and a home isn't purely financial
This comparison treats both paths as pure numbers. Two things it doesn't weigh:
Investment returns aren't guaranteed
A stock portfolio can and does have years of negative returns, unlike a fixed mortgage payment. Someone risk-averse may reasonably prefer a lower, steadier assumption — or discount the whole comparison.
Owning has non-financial value
Stability, control over the property, and not facing a rent increase or lease non-renewal are real, just not something this net-worth math prices in.
Next step
Test your own return assumption
Use the "Stock return → 5%" scenario button on the calculator, or open Advanced assumptions to set any investment return you believe is realistic for you.