Are Home Mortgages Cheaper Than Paying Rent?

Theoretically speaking, rent is usually the cheaper option. Home mortgages are thought of as investments whereas renting an apartment is generally a temporary choice. However some may even say renting is a better financial choice than buying.

The logic behind this idea is that mortgage payments are almost always more than rent, and beyond that you still have to pay for home insurance, closing costs, interest on the loan, maintenance and upkeep, etc. All of which far exceeds the average rent of say $600 a month. You can then take the money you saved by renting, and invest it into more profitable areas.

The Often Ignored Benefit of Home Mortgages

The problem with this theory is that while you save money now, you will always have the rent payment. Homeowners on the other hand, eventually have no mortgage payments. This is obvious. But what’s less obvious for many of us are the inflation costs. Keeping in mind most home loans are for 30 years, an apartment that’s $600 today will be over $850 in ten years with 4% inflation, making it close to the cost of a home loan.

If we look at the cost to rent in 20 years, that $600 apartment is now costing more than $1,300 a month. Greatly exceeding many mortgage payments. In 30 years, the mortgage payments are over while the renter is now paying close to two grand for that same apartment. So while renters save money initially, and never have to pay interest on a loan – the homeowner wins out in the end.
Moral of the story: buying is nearly always better than renting.

And with the current interest rates, there is no better time to get a home mortgage than now. If you want to check what your loan payments will be, check out a mortgage payment calculator. For those wise, economically savvy existing homeowners, you may want to check a mortgage refinance calculator to be sure you’re getting the best rates.


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