The Real Cost of Homeownership: Buying vs. Renting Affordability

Many renters believe that buying a home is beyond their budget because the monthly mortgage payment appears to be much higher than their rent. While that is sometimes true, the actual cost of homeownership can be closer than many people realize once federal tax savings and long-term equity growth are considered.

Example

Assume a tenant earning $75,000 per year currently rents a home for $1,850 per month. Instead, they purchase that same home using the following financing:

Purchase Price: $290,000

Down Payment: 3.5% ($10,150)

FHA 30-Year Fixed Mortgage: $279,850

Interest Rate: 6.5%

Estimated Monthly Housing Payment

Principal & Interest: $1,769

Property Taxes: $242

Homeowners Insurance: $150

FHA Mortgage Insurance: $128

Total Monthly Payment: $2,289

Tax Benefit

During the first year, the homeowner is estimated to pay approximately:

Mortgage Interest: $18,100

Property Taxes: $2,904

Total potential itemized deductions: $21,004.

For a single taxpayer in 2026, this exceeds the standard deduction by about $4,900. Assuming a 22% federal tax bracket, the homeowner would save approximately $1,078 in federal income taxes, or about $90 per month.

This reduces the effective monthly cost of homeownership to approximately $2,199.

Compared to renting at $1,850 per month, the homeowner is effectively paying only about $349 more each month.

Building Wealth

Unlike rent, a mortgage payment builds ownership. A portion of each payment reduces the loan balance, increasing the homeowner’s equity. In addition, homes have historically appreciated over time, although appreciation is never guaranteed.

Assuming a conservative 3% annual appreciation, after five years the homeowner would have approximately:

$46,200 in home appreciation

$17,900 in mortgage principal paid down

$10,150 original down payment

Total Estimated Equity After Five Years: Approximately $74,000

Success Story

This brings me to the story of an acquittance of mine many years ago. She was a single woman in her mid-20s. I mentioned to her that, with the tax savings discussed above,she could own a home and pay about the same, or maybe even a little less each month than she was paying in rent. From that point forward, she was determined that she was going to purchase a home.

It did not take her very long to find the perfect house. Offer was made, accepted and a short time later, she was moving in. She sold this house 6 years later when she relocated. However, in the 6 years that she owned this home, the house appreciated 75% over what she had paid for it. She was able to use this equity to purchase her new home in her new city and was able to continue to increase her net wealth.

Conclusion

Every buyer’s financial situation is different, and homeownership may not be for everyone. However, for many qualified renters, the difference in monthly cost may be far smaller than expected, while the opportunity to build long-term wealth through homeownership can be substantial.

This week’s blog post comes to us from Wayne Snyder. Connect with him today on LinkedIn!

Rent or Buy: Identifying the Best Course of Action

A question we often ask real estate investors is whether they want to “Rent or Sell”? We do this as a way to encourage them to always consider the ideal portfolio composition and calibration. Depending upon the investor’s current goals and strategies, this question often prompts owners to consider their best move forward that they may not have considered at the time. They may realize that the best move is to sell the asset and reinvest the proceeds into a better asset or a better market that Auben Realty operates in.

Similarly, renters should ask themselves whether they should “Rent or Buy” as they are mapping out their financial goals and strategies. This is a key planning decision as a recent study conducted by the National Association of Realtors shows that in 2025, the net worth of homeowners is 43 times greater than that of renters.

For renters who have never owned their own home, the financial costs of owning a home can seem overwhelming. You may think that you cannot afford to pay a monthly mortgage payment, real estate taxes, homeowner’s insurance and all of the maintenance and up-keep costs. That could seem to be a financial burden that you cannot undertake.

However, you are already covering all of those expenses and more with every monthly rent payment you make. Your rent payment is paying for the landlord’s mortgage and financing expenses, the annual real estate taxes, their homeowner’s insurance, an allowance that covers all maintenance and upkeep costs plus most likely a monthly profit margin for the owner.

Understandably, a major hurdle for a first-time home buyer is being able to afford the down payment. Many are under the misconception that they must have at least 20% of the purchase price to put down in order to obtain a mortgage. However, there are many programs available for first time home buyers where you may qualify for a no down payment or a minimal down payment mortgage program. There are several lending options available such as FHA with a minimum down payment of 3.5%, VA for qualifying military personnel has no money down options and USDA financing offers 0% down payments for eligible buyers in qualifying rural areas and certain suburban locations. In addition to these programs, there are also creative financing options. One such program is Ownify, which requires only 2% down. Another program is Divvy which is a rent-to-own program that allows buyers time to improve their credit scores so that they can secure a mortgage in the future.

If you want to learn more about how you may qualify for these types of mortgages and determine if the path to homeownership may very well be within your reach, you are encouraged to speak with a trusted real estate agent or directly with a mortgage lender who can explain the various programs available and show you how to begin your journey to home ownership.

This week’s blog post comes to us from Wayne Snyder!