Finance category
Mortgage, loan, investing, tax, and money calculators.
Cash Purchase vs Financing Calculator
Compare paying cash for a property vs financing it and investing the freed-up capital. The math turns on your investment return relative to the mortgage rate.
Net financing advantage
$128,901
financing wins
Cash freed by financing
$373,000
to invest separately
Investment value at horizon
$805,279
growing at investment rate
Mortgage payments at horizon
$303,378
paid out across 10 years
How to read it
Cash purchase: pay $479,500 once and you're done — no payments. Financing: pay $106,500 upfront then $2,528/mo, with the freed-up cash invested separately.
Financing wins when investment return exceeds mortgage rate. Cash wins when you value certainty, can't reliably earn above mortgage rate, or want zero monthly housing obligation. Risk-tolerance and liquidity needs are real factors beyond pure math.
How to Use
- Enter the property price.
- Enter closing costs for both scenarios — cash purchases have lower closing costs (no lender fees).
- Enter the down payment percent and mortgage rate for the financing scenario.
- Enter your expected investment return on the freed-up capital.
- Enter your horizon and read the net advantage.
Frequently Asked Questions
When does cash beat financing?
When investment returns are uncertain or below the mortgage rate, or when you value the certainty of zero monthly housing payment. Cash buyers also often negotiate price discounts that aren't reflected in this calculator.
How much do cash buyers save on closing costs?
$5,000–$15,000 typically. No lender fees, no mortgage points, no prepaid interest, no origination, sometimes lower title insurance because lender's policy isn't required.
Does this account for tax deductions?
No. Mortgage interest deduction can lower the effective mortgage rate by 15–25% if you itemize. Investment account type (taxable, IRA, 401k) also affects net returns. Adjust your inputs.
What about cash discounts?
Cash buyers often negotiate 1–5% off list price because of certainty and speed. If you can negotiate a $20,000 discount on a $475,000 property, that's a real advantage to cash that's outside this calculator's scope.
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