Mortgage Myth #8: Rents Are Always Cheaper Than Mortgages

“Rent is cheaper than owning a home.”

You’ve probably heard that recently — especially with rates in the 6s and 7s.

But that phrase deserves a closer look.

Because even when a mortgage payment is higher than rent on paper, the full picture of affordability and long-term benefit tells a different story.

Let’s unpack it — monthly payment to monthly payment, and year over year.

Myth: Rents are always cheaper than owning.

Truth:  While it may look that way upfront, mortgage payments often offer greater affordability over time — and they come with long-term equity growth, tax advantages, and predictable payments.

Let’s Compare: Rent vs. Buy

Scenario: Current rent of $2,200/month and considering a $325,000 home using an FHA loan with 3.5% down. We'll run the numbers using today’s realistic rates: 7.5% interest, 8.97% APR.

Here’s what that looks like over three years:

Ownership (FHA Loan – 3.5% down @ 7.5% note rate, 8.97% APR*):

• P&I: $2,193/month
  
• Taxes & Insurance: ~$371/month
  
• Total Estimated PITI: ~$2,700/month
  
• Total Paid in 36 Months: ~$97,200
  
• Principal Paid Down: ~$9,400
  
• Home Appreciation (12% est.): ~$39,000
  
• Total Equity Gained: ~$48,400

Renting:

• Starting Rent: $2,200/month
  
• Total Paid Over 3 Years (with modest 3% annual increase): ~$79,200
  
• Equity Gained: $0
  
• Control Over Monthly Cost: None
  
• Risk of Rent Hikes: 100%

Result? Even though the monthly mortgage is about $500 higher, the homeowner ends up roughly $30,000 ahead after three years, once equity and appreciation are factored in. Plus, they lock in their housing cost, avoid rent hikes, and start building long-term wealth.

And don’t forget the tax advantages: homeowners may also benefit from mortgage interest and property tax deductions (check with your CPA or advisor).

Add in these items:

• Mortgage interest tax deduction (where applicable)
• The ability to refinance if rates drop
• No rent increases — fixed PITI
• Increasing home equity with every payment

Now, who’s actually coming out ahead?

What’s Often Left Out of the Rent vs. Buy Debate:

• Renters are 90%+ more likely to be displaced by landlord decisions
• Homeowners have 40x higher median net worth than renters (source: Federal Reserve)
• Fixed mortgage payments allow families to budget and save consistently
• Ownership can unlock multigenerational housing or rental income strategies

Affordability ≠ Only the Monthly Payment

Real affordability takes into account:

• Payment stability
• Equity growth
• Tax strategy
• Long-term financial goals
• Asset leverage and ROI

Take Action:  Want a personalized breakdown of what homeownership really looks like for your situation?

→ Contact me with the word “Affordability” for our Real Affordability Game Plan

→ Let’s run your numbers — not just the myth’s.

→ Check out our First Time Buyers page.

If you're interested in seeing the other myths that we're attempting to clarify, check them out here.

*Fine Print:  Payment illustration assumes 3.5% down, financed UFMIP, 0.55% annual FHA MIP, 1% property-tax rate, and $1,200/year homeowner’s insurance. Actual payment terms will vary by borrower profile and location. APR reflects financed UFMIP and standard FHA closing costs. Appreciation is estimated at 12%, based on average U.S. trends.