Cash vs. Finance Calculator

What it does

Two ways to buy the same property.

This calculator puts the cash purchase and the financed purchase side by side on the same property and the same holding period. Cash shows no mortgage payment, no interest, and a larger cash outlay. Financing shows a smaller outlay, a monthly payment, interest cost, and leverage that can change your return on cash. Which outcome fits you is a question about your goals, your cash, and your risk tolerance.

What each major input means

• Down payment, rate, term: the financed scenario's terms; use current quotes from a licensed lender.
• Closing costs: usually higher for financed purchases, which raises that scenario's cash outlay.
• Holding period and appreciation: the timeframe and growth assumption behind the equity estimate.
• Operating expenses: same in both scenarios, since how you pay does not change the cost of running the property.

How the calculation works

The same property, two balance sheets

The cash scenario invests the full price plus closing costs and collects rent minus expenses. The financed scenario invests the down payment plus closing costs, pays an amortizing mortgage, and finances the rest. Financing cost is the total interest paid over the holding period, from the amortization schedule. Cash-on-cash return divides annual cash flow by each scenario's upfront cash. Estimated equity is the projected value after appreciation minus any mortgage balance remaining. Appreciation at zero removes growth from the comparison.

What the outputs mean

• Cash flow versus cash required: financing usually pairs a lower upfront cost with a monthly payment; cash usually pairs a high upfront cost with no payment.
• Financing cost is the measurable price of leverage over your holding period.
• Opportunity cost: the cash-buy scenario ties up capital that could be invested elsewhere or used for the next property, which no single number can capture.