This calculator settles a question the usual rent-vs-buy tools skip: when you could pay for the house outright, should you? It runs three paths from the same pile of cash — pay in full, borrow and keep the rest invested, or rent and keep all of it invested — with everyone spending the same amount each month and whatever is left over going into investments. The verdict is after-tax net worth at the end of your horizon, with the crossover years, the return and mortgage rate at which the paths tie, the down payment that maximises your result, and a first-year cash table so you can see how much liquidity each choice leaves you.
Cash vs Mortgage vs Rent Calculator
You have enough to buy the house outright. Pay cash, borrow and invest the rest, or rent and invest all of it — three paths, one net-worth answer.
Both buying paths own this same home, so these costs hit the cash buyer and the mortgage buyer alike. The only difference between them is where the purchase money comes from. The gain exclusion is $250,000 single, $500,000 married filing jointly under IRC section 121.
On this path you put down the deposit, keep the rest of your cash invested, and pay the mortgage every month. PMI of 0.5% a year is added while you owe more than 80% of the purchase price. Whether this beats paying cash comes down to one thing: is your investment return, after tax, higher than the mortgage rate?
The renter keeps the entire pot invested from day one and only ever pays rent. The deposit comes back at the end, but earns nothing while the landlord holds it.
Verdict after 10 years
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Net worth at the end of each path
The spread that decides it
Time — when each line crosses
What would flip the answer
If your investments return more or less
Cash out of pocket in the first year
Where the money actually goes
Show the math
Net worth, year by year
Pay cash
Mortgage + invest
Rent + invest
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Why "cash or mortgage" is really a question about your investments
If you can afford to buy a home outright, the mortgage is optional — which turns it into an investment decision. Borrowing means keeping a large pile of cash invested instead of handing it to the seller, and paying the bank for the privilege. That bet pays off only when the money you kept earns more, after tax, than the loan costs. This calculator puts the three ways of housing yourself with that cash on the same footing and reports what each is worth at the end.
How the three paths are compared
Everyone starts with the same pot: the home price plus closing costs. The cash buyer spends all of it on day one. The mortgage buyer spends the down payment and closing costs and keeps the loan-sized remainder invested. The renter hands over only a deposit and keeps everything else invested.
From then on, every path spends the same total each month. The mortgage buyer usually has the highest bill, so that sets the budget; the cash buyer invests what would have gone to the bank, and the renter invests whatever the budget exceeds rent by. If rent is the highest bill, the two buyers invest the difference instead. This is the only way to compare fairly — otherwise the path with the cheapest month looks rich simply because it spent less.
At the end, each home is valued after selling costs and any capital gains tax above the exclusion, the mortgage balance is subtracted, and each portfolio is taxed on its gain. What is left is the net worth shown on the three cards.
The spread is the whole story for cash vs mortgage
Both buyers own the same house, so appreciation, tax, insurance and upkeep cancel out. What separates them is the loan on one side and a portfolio on the other. If your after-tax return is above the mortgage rate, borrowing wins and wins more the longer you hold; if it is below, paying cash wins by roughly the interest you never paid. At a 6.5% mortgage and 7% return taxed at 15%, the after-tax return is about 6%, so paying cash edges ahead. At 4.5% on the loan the mortgage pulls ahead comfortably. PMI and the closing costs of the loan itself tilt the balance a little further towards cash.
The two things the numbers cannot see
Liquidity. The cash buyer ends day one with nothing in the bank. That is a real risk — a job loss or a roof — and the first-year cash table shows how thin it is. A home equity line can restore some of it, but at a cost and only while the bank agrees. Risk. A 7% return is an average, not a promise. The mortgage path is leveraged: the house is fully exposed and the portfolio is invested, so a bad year hits twice. Paying cash is the conservative choice, and the sensitivity table shows how much that conservatism costs at different returns.
Where renting fits
The renter is the fully invested, fully liquid case. They win when the home's total cost — transaction costs, taxes, upkeep and the forgone return on the price — outruns what rent would have cost. That is common in expensive markets where price-to-rent ratios run above 20, and rare where they run below 15. The tie-point rent shows exactly where your inputs sit.
What this model leaves out
It does not deduct mortgage interest, which only helps if you itemise and since 2018 most filers do not. It does not model a refinance if rates fall, extra principal payments, or a HELOC. It assumes the renter and the cash buyer actually invest the difference every month; in practice many people spend it, which is the main reason real outcomes favour a mortgage more than the arithmetic does. Our rent vs buy calculator covers the case where you cannot pay cash, and the mortgage calculator shows the loan itself in detail.
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Frequently asked questions
Is it better to pay cash for a house or get a mortgage and invest?
It depends on one comparison: your expected investment return after tax against your mortgage rate. Above the rate, the mortgage builds more wealth and the gap grows every year; below it, paying cash wins by roughly the interest you never paid. At a 6.5% loan you need to earn about 7.6% before tax for the mortgage to break even over ten years, once PMI and closing costs are included.
Why does the calculator make everyone spend the same amount each month?
Because otherwise the cheapest month looks like the best deal. If the cash buyer only pays tax and upkeep while the mortgage buyer pays that plus a loan, comparing them means giving the cash buyer credit for the payment they avoided. So the model sets a common monthly budget — the highest housing bill among the three — and every path invests the part of it that its own housing does not use.
What does the mortgage rate need to be for borrowing to beat cash?
Roughly your after-tax investment return, minus a little for PMI and the loan's closing costs. With a 7% return taxed at 15% — about 6% after tax — the tie point is near 6.2%. The results show the exact rate for your inputs, and the sensitivity table shows how the verdict moves if your investments earn 4% or 10% instead.
Does paying cash mean I lose the down payment's growth?
Yes, and that is the core trade. Paying cash forgoes the return on the entire price, not just a deposit. In exchange you avoid all interest and PMI and end up debt-free with a lower monthly bill, which the model reinvests. The cash path is the conservative one: no leverage, no interest risk, and no liquidity.
How does renting come out ahead of both buying paths?
The renter keeps the whole pot invested and is never exposed to closing costs, selling costs, property tax or upkeep. When those costs plus the forgone return on the price add up to more than rent would have cost over the horizon, renting wins. That tends to happen when the home price is more than about 20 years of rent, or when your investment return is high relative to home appreciation.
Why is the best down payment often 100%?
Because whenever the after-tax return is below the mortgage rate, every dollar borrowed loses money, so borrowing less is always better and the optimum is to borrow nothing. When the return is above the rate the opposite holds and the best down payment falls to whatever keeps PMI away, usually 20%. The sweep reports which side of that line your inputs are on.
Does this include the mortgage interest tax deduction?
No. Since the 2018 standard deduction increase, only a minority of US homeowners itemise, and for most of them the deduction is worth far less than the headline suggests. If you do itemise at a high marginal rate, the mortgage path is somewhat better than shown here.
Are the results in today's dollars?
No, they are nominal, like the rent-vs-buy calculator. Because all three paths are inflated by the same amount over the same horizon, the ranking and the crossover years are unaffected; only the size of the final numbers would shrink if you deflated them.
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