Loan basics

Opportunity cost

Also known as: invested down payment, capital opportunity cost

The return you might forgo by using cash for a home instead of investing it.

Opportunity cost is the benefit you give up by choosing one use of money over another. In a rent vs buy comparison, cash used for a down payment and purchase closing costs cannot also sit in investments. Rent-path models often invest that capital (and monthly cash-flow differences when renting costs less) at an assumed return rate. Those returns are educational assumptions, not guarantees or forecasts.

See also