Buy vs rent tool
How much down payment: 5%, 10%, 20% or more?
A bigger down payment lowers interest and avoids mortgage insurance, but it ties up cash you could invest. This tool runs buy vs rent at several down payments side by side.
Example with default assumptions
After 10 years, buying finishes ahead of renting by about $41,686. On these assumptions buying overtakes renting after about 5.7 years, once selling costs are counted. The owner's first-month cash cost is $3,757, compared with $2,325 for the renter.
| Year | Home value | Mortgage balance | Buyer net worth | Renter net worth | Buying minus renting |
|---|---|---|---|---|---|
| 1 | $621,000 | $469,303 | $117,835 | $150,940 | −$33,105 |
| 2 | $642,735 | $458,120 | $149,966 | $176,418 | −$26,452 |
| 3 | $665,231 | $446,428 | $183,341 | $202,855 | −$19,514 |
| 4 | $688,514 | $434,203 | $218,008 | $230,289 | −$12,281 |
| 5 | $712,612 | $421,423 | $258,759 | $258,763 | −$4 |
| 10 | $846,359 | $348,248 | $460,065 | $418,379 | $41,686 |
Leverage cuts both ways
With a small down payment, price growth is magnified on your own money, but so are losses, and the insurance premium adds cost. With a large down payment, you borrow less and pay less interest, but your cash is concentrated in one home.
Questions people ask
Is 20% down always better?
Not always. It removes insurance premiums, but the right level depends on your return assumptions, risk tolerance and other uses of the cash.
How is the premium treated?
It is added to the mortgage by default and compounds with it. You can pay it in cash instead.
What about the minimum down payment?
It is 5% of the first $500,000 and 10% of the rest up to $1.5 million; 20% above that. The tool raises lower inputs to the minimum.
Educational estimates based on your inputs; not advice. See the methodology and assumptions.