Net worth year by year
What you own at the end of each year: the home’s value minus the mortgage left, plus your investments. The dashed line is when the mortgage is paid off. The open circle is where buying pulls ahead.
Your first month
What each path costs in month one. After that, rent, the home’s value and the costs tied to it go up, while the mortgage payment stays the same.
If you buy
If you rent
Money you pay and never see again. The down payment and loan repayments are not in here, because they turn into home equity.
How this works
Same money on both paths. Each month, whichever path costs less invests the difference in a stock index fund. The renter also invests the cash the buyer puts down on day one, and any extra you save each month. The buyer puts that extra toward the mortgage or into stocks, as you choose.
Net worth is what you own, not what you would cash out. The home counts at its value minus the mortgage left, and investments at their value. Nothing is sold, so there are no selling costs or taxes on gains.
Money gone for good is spending you never get back: rent, or interest, property tax, maintenance, insurance and the costs of buying.
Kept simple on purpose. A fixed mortgage rate, rent that rises once a year, a home value that grows steadily with owning costs growing along with it, steady average returns, and amounts as they will be in the future, without adjusting for inflation. Real markets swing, so try lower growth rates to see how much the answer depends on them.