Mortgage Myth #8: Rents Are Always Cheaper Than Mortgages
Is Rent Really Cheaper Than a Mortgage? Let’s Talk Numbers and Net Worth.
“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.
