Is Renting or Owning More Affordable?
2 minute read
January 1, 2015




In 2014 renters paid $441 billion in rent, an increase of 4.9% from the year prior. On average it was an increase of $26 per month, but some counties saw a much larger increase in rent. In San Francisco renters paid an increase of over 14%  of their already expensive rental prices. Let’s examine the costs of renting and buying to analyze what is a more affordable option.

The largest demographic of renters is the Millennial generation, who is anyone born between 1977 and 1992.  They are sad with a rent that consumes about 30% of the median household income and student loan payments that amount to a mortgage payment in itself. Due to such large payments consuming so much of their monthly income many renters have trouble saving money for a downpayment or getting qualified for a mortgage.

Costs of Renting

  • Monthly payment of rent is on average higher than a mortgage payment.
  • The money spent of rent is not building any equity, it is just money lost each month.
  • Rental prices rise along with inflation, and typically rise quicker than incomes.
  • Renters may find themselves in a higher tax bracket due to loss of tax deduction they’d receive from interest they pay on a mortgage.

Costs of Owning

  • Homeowners must pay property taxes every year and homeowners insurance is much more expensive than renter’s insurance.
  • There are greater risks associated with owning. There is much more responsibility and owners can lose money if their home decreases in value.
  • Homeowners must pay for their own maintenance. No more calling the landlord to fix the broken garbage disposal.
  • Homeowner’s that need private mortgage insurance pay a couple hundred dollars more each month.
  • Homeowner Association dues are another cost associated with homeownership.

Overall, owning a home is cheaper on average than renting. The opportunity cost of renting in addition to rising rental rates year by year makes it a much more expensive alternative. If you are looking for expert guidance on the costs of renting and buying to analyze what is a more affordable option, contact Aceland Mortgage.

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