Buy a House at 35, or Rent and Put the Down Payment in the S&P 500?
A 35-year-old buys the median US home with 20% down and a 5% mortgage. An identical 35-year-old rents an equivalent place and invests that same down payment — plus whatever the mortgage costs more than rent each month — in the S&P 500. Thirty years later, at 65, who has more?
Assumptions: $420K home, 20% down, 5% APR 30-yr fixed mortgage (below today's ~6.7% average), 4% home appreciation, 10% SPY return, 3.5% rent growth, 8% selling costs. All figures nominal — sources at the end of the article.
The Two Paths, Starting From the Same $84,000
Both people start at 35 with $84K in cash — the 20% down payment on a $420K home. The buyer puts it down, borrows the other $336K at 5% over 30 years, and pays $1,804/month in principal and interest, plus property tax, insurance, and maintenance that scale with the home's rising value. The renter puts the full $84K into an S&P 500 index fund on day one, rents an equivalent home starting at $2,188/month, and invests whatever the owner's monthly housing cost exceeds their rent that year. When rent costs more than owning, that flips — the renter's monthly contribution shrinks, and eventually goes negative.
| Assumption | Value | Source / basis |
|---|---|---|
| Home price | $420K | NAR |
| Down payment (20%) | $84K | Avoids PMI |
| Mortgage | 5% APR, 30-yr fixed | $1,804/mo P&I — vs. ~6.7% today (Freddie Mac) |
| Property tax | 0.9%/yr of home value | Tax Foundation |
| Insurance | 0.6%/yr of home value | Bankrate |
| Maintenance | 1%/yr of home value | Common rule of thumb (1-4%) |
| Home appreciation | 4%/yr | FRED / Case-Shiller |
| Starting rent | $2,188/mo | Zumper, price-to-rent ratio of 16 |
| Rent growth | 3.5%/yr | BLS CPI, rent of primary residence |
| SPY return | 10%/yr | SlickCharts (10%) / Vanguard (7%) |
| Selling costs | 8% of sale price | NerdWallet |
30-Year Net Worth
Owner's line is home value net of the remaining mortgage balance and a 8% selling cost, as if sold that year. Renter's line is the down payment plus every month's cash-flow difference, compounded at the SPY return selected above.
Two Things the Chart Doesn't Say Out Loud
First: if the buyer sold in year one, they'd walk away with less than their $84K down payment — the 8% selling cost eats more than the first year's paydown and appreciation combined. Home equity doesn't recover past the original down payment until year 2. This is the standard "you need a few years to break even" math that shows up in every rent-vs-buy calculator, and it's a real cost of moving, not a modeling artifact.
Second: the mortgage payment is fixed for 30 years, but rent isn't. Around year 11, rent overtakes the owner's total monthly cost, and the renter's monthly contribution to their SPY account turns negative — they're now paying more out of pocket than the homeowner. The renter's early-years advantage — investing several hundred extra dollars a month — quietly shrinks and eventually reverses. It's the $84K invested on day one, compounding for 30 years at 10%, that does almost all of the heavy lifting in the final number.
Year-by-Year Snapshot
| Year | Home Equity | SPY Portfolio | Monthly Cash Diff |
|---|---|---|---|
| Year 5 | $162K | $162K | +$270/mo |
| Year 10 | $299K | $271K | +$13/mo |
| Year 15 | $468K | $425K | -$285/mo |
| Year 20 | $677K | $650K | -$632/mo |
| Year 25 | $934K | $985K | -$1K/mo |
| Year 30 (age 65) | $1.25M | $1.49M | -$1K/mo |
Key Takeaways
At 10% SPY returns, renting and investing the difference ends 30 years ahead: $1.49M vs. $1.25M in home equity — mostly because equity returns simply outrun 4% home appreciation, even after selling costs.
The result is extremely sensitive to the SPY return assumption: $1.49M at 10% vs. $544K at a more conservative 7% — a gap of $947K, against a home equity outcome of $1.25M either way.
A home's leverage is already baked into this comparison — you only fund 20% down but capture 100% of the appreciation. The result above is real estate's leveraged return against equities' unleveraged one: equities win at a 10% return, while the home wins at 7%.
The comparison assumes the renter actually invests the monthly difference instead of spending it. That behavioral assumption, not the math, is where most real-world rent-vs-buy comparisons break down.
A home isn't just a financial asset — it's forced savings, a hedge against rent inflation, and a fixed payment in a world of rising costs. None of that shows up in a net-worth chart, and none of it is irrational to value.
This uses one national average and one 30-year path. Move the horizon, the market, or the return assumption and the answer changes — see how sensitive the 4% rule is to the same kind of assumption shifts.
Run this with your own numbers
Your home price, rate, local rent, and return assumptions all differ from the national averages here. Beagle lets you model your specific home purchase, mortgage, and investment mix inside a full retirement projection.
Sources
A note on the numbers: this is a point-estimate comparison using long-run national averages, not a forecast. Home prices, rents, and the S&P 500 do not move in straight lines — a buyer or renter starting in a different year, or a different metro, could see a materially different outcome. The analysis also ignores capital gains tax on the renter's eventual sale (partially offset by the primary-residence exclusion the homeowner gets), the mortgage interest deduction, PMI, refinancing, and moving costs. Beagle's scenario planner lets you model a real home purchase — including the mortgage, carrying costs, and its effect on your broader portfolio — year by year alongside taxes, Social Security, and withdrawal strategy.