Is Renting Cheaper Than Buying: Find Tips and Answers


Is Renting Cheaper than Buying?

For decades, the traditional advice has been to buy a home. Previous generations considered real estate to be the safest investment while renting was seen as throwing away money. And even today, many people consider homeownership to be synonymous with the American dream.

But buying a home is a major life decision and not one to be made lightly. There are many aspects to consider. What are you looking for? There’s the number of bedrooms, square footage, location, and of course, the big question: money.

Faced with the realities of their finances, many people are opting to rent instead of buy. But is renting cheaper than buying, and is it the best choice for you?

To help you decide, we’ll break down the costs involved in both options, plus take a look at some of the other pros and cons.

Is Renting Cheaper Than Buying a Home

Cost of Moving In

Before you compare the monthly payments of rent versus a mortgage, you should consider the different costs involved just to move in.

Moving into a House

According to the National Association of Realtors, the national median home price in March 2021 was $329,1000. The typical house down payment is 7%. This means that, on average, you’ll need $23,037 to put towards your down payment.

Don’t have that much cash handy? For most loans, the minimum down payment is 3%, which would equal $9,873.

On top of that, you’ll be responsible for closing costs such as application fees, HOA payments, insurance, property taxes, and more.

These generally come out to be anywhere between 3% and 5% of the sales price. Using NAR’s median home price, that means you’ll need at least another $9,873 and possibly as much as $16,455 to close on your home.

Some lenders will allow you to roll your closing costs into a loan, which can make this more affordable. Keep in mind, though, if your closing costs become part of your loan you’ll have to pay interest.

Moving into a Rental

The average monthly rent is $1,124. Most renters will need to put down three months in rental costs: first, last, and one month’s deposit. This would come out to $3,372, much less than the down payment and closing costs on a house.

If you’re having trouble saving enough to move into a house, renting is probably a more feasible option.

Monthly Costs

If you have the money you need for a down payment on a house, then the next thing to weigh is the monthly mortgage payments versus monthly rent.

Mortgage Payments

According to the U.S. Census Bureau, the median monthly mortgage payment is $1,487 (June 2021).

However, this will be affected by many different factors, and your monthly mortgage payment can end up being hundreds of dollars higher or lower.

Down Payment

The more you put towards your down payment, the less you’ll be paying off. This can greatly lower your monthly payment.

Mortgage Rate

The lower the interest rate, the lower your payment. Timing your home purchase for when rates are lower can save you well over $100 per month.

Here’s an example: a $300,000 mortgage at a 3.5% interest rate = $1,347 per month. At a 2.5% interest rate, it’s lowered to $1,185 per month. The mortgage program you choose can be a key consideration.


Where you buy a home will have a huge impact, possibly the biggest impact, on your monthly mortgage payment. Housing prices vary greatly from city to city, or even from one neighborhood to another in the same city.

Market Trends

You also need to consider the market situation. Buying a home during a seller’s market means you’ll be paying top dollar for your home, driving up your monthly payments. During a buyer’s market, however, you’ll be able to negotiate a better price and reduce your payments.

Rental Prices

As we saw earlier, the average monthly rent is $1,124.

But keep in mind unless you sign a longer lease or live in a rent-controlled unit, your landlord can raise the rent each time you renew your lease. They can also raise the rent if your lease expires and you decide to rent on a month-to-month basis while you find your next home.

In most areas, rent increases are governed by local laws or statutes. For example, your landlord can’t increase the rent in the middle of your lease. But, they may increase it with a month-to-month lease with 30 days’ notice in writing. Some states may even require certified mail.

And if your rent increases, you might have to add more money to your security deposit. Security deposits are usually calculated as a multiple of the rent (i.e. one month rent, or double the monthly rent). So when the rent goes up, your landlord may ask you to add to your security deposit as one of the terms of renewing the rental agreement.

Other Costs

There are other costs involved, too, besides a monthly mortgage or rental payment.

If you own your home, you can expect, at minimum, the following additional costs:

  • Utilities
  • HOA fees (if applicable)
  • Repairs
  • Maintenance
  • Landscaping
  • Pest control

When you rent, you’re typically only responsible for utilities. And even then, many rentals include some of the utilities, especially cable or WiFi services. Other expenses, including repairing or replacing appliances, will be taken care of by the landlord or management company.

Moving Out

Let’s finish the homeownership cycle by talking about the expenses involved in moving out.

Moving out of a House

When you sell a home, there are a few different items that will affect your potential costs

First, if you’re lucky, your home has appreciated in value. You’ll be able to sell it for a profit. In general, home values increase over time, so the longer you live there, the more you might make on a sale. However, if you bought high and are forced to sell low, you might come out even… or worse.

You’ll also have quite a few costs at closing. In most cases, you’ll be responsible for paying the real estate agent’s commission fees, which are 5% to 6%.

You’ll also have other closing costs, such as a title search, inspection, transfer taxes, and more. These costs usually come to somewhere between 2% and 4% of the home value.

Moving out of a Rental

Here, renters have it easy. In general, all you’ll need to do is let your landlord know you won’t renew your lease, and you’re set. But there are a couple of other things to keep in mind.

  • Read your rental agreement carefully to make sure you meet the “prior notice” requirements for not renewing your rental. Some leases require 60 or even 90 days advance notice; some might require written notice.
  • Your rental will need to be in good condition, or your landlord might refuse to return your deposit.
  • If you’re canceling mid-lease, due to a sudden relocation, there will most likely be a penalty. Check your contract; you might be responsible for several months of rent.

Renting vs. Buying

So, in the end, is renting cheaper than buying? In all the stages we’ve looked at, from moving in to monthly costs to moving out, renting is typically cheaper than buying a house.

If you’re only looking at dollars, then renting is the best way to save money on housing. But, when you start looking at other factors — investment value, possible tax breaks, building equity, sense of community — homeownership might still be the best choice for you.

And remember, each area is different, so research your local market to be sure of average home and rental prices before you make any financial decisions.

About the author: The above article about renting is cheaper than buying was written by Anna Compagine Cohen. Anna is a Content Writer at UpNest, where agents compete and you win. Anna has an extensive background in the real estate industry. She is a published author who specializes in real estate, personal finance, travel, and wellness. When she’s not writing, Anna can be found reading, walking on the beach, or spoiling her teenagers and their rescue dogs.