LIFEPLAN BY INSIGHTWAY / PLANNING GUIDE
How does buying compare with renting?
Compare the full cash requirements and ending assets and liabilities over the same period. Include upfront costs, recurring costs, financing and eventual sale costs, rather than comparing rent with the mortgage payment alone.
Published by InsightWay · Updated
Definitions
Home equity is the home value minus mortgage debt. A down payment transfers cash into home equity before fees; it is not automatically a net-worth loss. Interest and fees are costs; principal repayments also reduce debt.
Worked example: first-year cash needs
Assume a 200,000 home, a 40,000 down payment, 6,000 of transaction costs, a mortgage payment of 1,000 monthly and other ownership spending of 400 monthly. First-year cash paid is 62,800. At 1,100 monthly rent with no other modeled costs, first-year rent is 13,200. The 49,600 cash difference is not the difference in wealth because the buyer also owns an asset and owes debt.
Formula and assumptions
Buyer cash paid = down payment + purchase costs + 12 × (mortgage payment + other spending) = 40,000 + 6,000 + 12 × 1,400 = 62,800. Renter cash paid = 12 × 1,100 = 13,200. Payments are supplied assumptions, not a quoted loan offer; deposits, moving, tax effects, investment returns and sale are excluded.
Limitations and next checks
To compare net worth, add an amortization schedule, property value assumptions, the renter’s retained cash and investment assumptions, and exit costs. Test a short holding period and a lower sale price. Maintenance, insurance, taxes and local transaction rules differ. LifePlan event legs require you to supply applicable costs and financing assumptions.
Sources and scope
The CFPB identifies transaction costs, maintenance, property taxes and insurance as considerations in a home purchase. The supplied payments and arithmetic here are hypothetical, not market rates or loan eligibility guidance.
Sources checked October 30, 2026. Examples use generic currency units. Educational information, not personal financial, tax or legal advice. Seek qualified advice for decisions specific to your circumstances.
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