Mortgage and home buying
Rent vs Buy Example With $2,000 Rent
Use a realistic rent-versus-buy comparison that includes ownership costs and the opportunity cost of cash.
Decision summary
The decision this example tests
Should you rent at $2,000 or buy with a mortgage?
With $2,000 starting rent and a $425,000 purchase, the 7-year model at a 0% alternative-return assumption shows a $13,600 advantage (rent cost minus ownership cost). Raising the hypothetical alternative return to 4% adds $30,882 of opportunity cost and changes the advantage to $-17,282. A 3-year stay is $-24,758.
Specific money question
Should you rent at $2,000 or buy with a mortgage?
Inputs used
- Monthly rent today: $2,000
- Annual rent growth: 3%
- Home price: $425,000
- Down payment: 20%
- Mortgage rate: 6.5%
- Ownership costs: property tax, insurance, maintenance, and selling costs
- Time horizon: 7 to 10 years
Engine-generated result
Source: rentBuyProjection
With $2,000 starting rent and a $425,000 purchase, the 7-year model at a 0% alternative-return assumption shows a $13,600 advantage (rent cost minus ownership cost). Raising the hypothetical alternative return to 4% adds $30,882 of opportunity cost and changes the advantage to $-17,282. A 3-year stay is $-24,758.
- 7-year advantage at 0% alternative return
- $13,600
- 7-year advantage at 4% alternative return
- $-17,282
- 3-year advantage at 0%
- $-24,758
- Modeled opportunity cost at 4%
- $30,882
$13,600
Tradeoff to watch
What can change the answer
This scenario is most useful when you adjust one assumption at a time in the related calculator. The comparison cards below show which version of the decision deserves a second pass.
Step-by-step interpretation
- Compare total monthly rent with total ownership cost, not only the mortgage payment.
- Account for the down payment as cash that could have been saved or invested if you kept renting.
- Spread buying and selling costs across the expected stay. A short stay makes those costs harder to recover.
- Change rent growth, home appreciation, maintenance, and years in the home one at a time. If the result flips easily, the decision is assumption-sensitive.
Scenario comparison
Short stay
Renting can look stronger when you may move in three to five years because transaction costs have less time to be offset.
Longer stay
Buying can improve when you stay long enough for principal paydown and appreciation to matter, but repairs and selling costs still count.
Common mistakes
- Comparing rent to principal and interest only.
- Assuming the down payment has no opportunity cost.
- Leaving selling costs out of the buy scenario.
Disclaimer
This scenario is for education and planning only. It does not provide personalized financial, tax, legal, credit, mortgage, or investment advice. Real outcomes can differ because rates, fees, taxes, insurance, lender rules, market returns, and household circumstances vary. Read the full financial disclaimer.
Next steps