Overview
The opportunity cost of a down payment is real: ,000 invested in an S&P 500 index fund earning 8% annually generates ,800 in year 1 -- money that could go toward rent while the investment grows. Whether buying beats investing depends on home appreciation, rent vs mortgage payment differential, and tax treatment. The math is not always obvious.
The opportunity cost of a down payment is real: ,000 invested in an S&P 500 index fund earning 8% annually generates ,800 in year 1 -- money that could go toward rent while the investment grows. Whether buying beats investing depends on home appreciation, rent vs mortgage payment differential, and tax treatment. The math is not always obvious.
What You Need to Know
- ,000 down payment invested at 8% = ,800 in year 1 vs reducing mortgage by K saving /month
- Rent savings if buying: ,000 monthly rent vs ,200 mortgage = ,400/year rent advantage for staying
- Home appreciation (historical 3-5% nationally) is the primary argument for buying over investing
- The break-even depends heavily on: local home appreciation, investment return assumption, and rent vs buy differential
- Many analysts conclude buying wins financially after 5-7 years in most markets -- depending on assumptions
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