Everyone is talking about housing costs, and how expensive (and almost unrealistic) homeownership has become. But perhaps we should look at how much more affordable renting is comparatively.
What if the new American dream doesn’t include the house and white-picket fence, but the flexibility and investment power of renting? Instead of boo-hooing about never being able to own a home, let’s look at the true cost and how you can actually make money by renting.
The Initial Costs of Buying a Home
While you might think, “Okay, yeah, I need to save for the down payment,” that’s only a part of the amount needed to close on a home purchase. Other costs include:
- Earnest Money or Good Faith Deposit – You may pay this amount to show the seller you are serious. While this one-to-three percent payment will count toward your down payment, you might lose it if the deal doesn’t go through (such as if you can’t secure a mortgage for the remaining amount).
- Home Inspection – This is usually a requirement of the mortgage lender, so they know that the purchase price and value of the home match. A basic one can cost $300 to $500, and specialized inspections (to check radon, pests, sewers, mold, etc.) can add hundreds more.
- Appraisal Fee – Again, your lender will require about $350 to $700 to ensure that the home matches what you are paying.
- Loan Origination/Processing Fee – Usually one percent of less of the loan amount, this fee is for the lender’s administrative work.
- Credit Report Fee – The lender will evaluate your riskiness, and a $30 to $50 credit report will help them evaluate your financial history.
- Underwriting Fee – The person who actually verifies your finances and approves the loan may bill you between $400 to $900.
- Title Search and Insurance – You want to make sure your new home is officially yours, and you’re not on the hook for the previous owners’ back taxes or anything. For $500 to $2,000, this search and coverage protects you.
- Recording Fees – As if there weren’t enough hands open, the county will need a payment to record the new deed, which can be around $50 to $250.
- Homeowners Insurance – Lenders don’t like to take on risks, so they might require you to pay the first year of homeowners’ insurance upfront.
- Property Tax Escrow – The local tax entity may need anywhere from two to six months of property taxes sitting in an escrow account before you can sign your name.
Comparatively, the initial cost to sign a rental lease is typically the first and last month’s rent plus a security fee, which may be half to twice the amount of a monthly payment.
The Cost to Borrow Money to Buy a Home
Unless you have $500k to a million dollars sitting in your bank account, you’re probably not buying a home outright. Almost everyone takes on a mortgage to afford the purchase price of a home. And while you might buy a house at, say, $750k, you’re actually spending more than that throughout the loan’s term.
As of March 2026, the average interest rate for a 30-year mortgage is between 6.16% and 6.35%. Using the midrange of 6.25%, this is how much you would pay collectively (principal plus interest) over the course of your loan based on the loan amount:
- $400,000 + $486,633 = $885,633
- $500,000 + $608,291 = $1,108,291
- $600,000 + $729,949 = $1,329,949
- $700,000 + $851,607 = $1,551,607
- $800,000 + $973,266 = $1,773,266
- $900,000 + $1,094,924 = $1,994,924
- $1,000,000 + $1,216,582 = $2,216,582
That purchase price is only the tip of the iceberg of what you ultimately pay. Many like to sell you on the idea that buying a home is an investment, and it is… for the bank.
That first monthly payment on a $700,000 loan is $4,310, with only $664 going to the principal and the remaining $3,646 going straight to the lender’s pockets. That ratio changes with time, and the last payment would be about $4,288 to the principal and $22 toward interest.
Relatively, every penny of your monthly rent goes to the landlord. But that monthly amount is the same for the length of the lease.
Ongoing Cost of Homeownership
If the A/C, laundry, or refrigerator breaks, the tenant calls the landlord to fix it. Likewise, renters typically don’t have to worry about landscaping, HVAC servicing, or other maintenance costs. But homeowners are on their own and have to absorb those expenses.
The annual expense of maintenance and repairs varies greatly by numerous factors, but the national average is between $7,400 and $11,000. That would be like spending an extra $766 a month in addition to your rent.
Landlords try to cover these costs by incorporating them into the monthly rent amount, which is why renting a space is typically more expensive than it would be to buy it. But that increased amount means consistency and less stress than the owner who has to prepare for the unexpected.
How Renters Can Save and Make More Money Than Homeowners
Owning a home means you’re building equity. In theory, your home will be worth more than you paid for it, so all of that interest, fees, and extra costs should come out in the proverbial wash.
But renters can use that difference (the money they’re not giving to lenders or repair persons) to invest. The historic return on investment in the U.S. stock market is around 10% annually. So, rather than paying 6.25% to buy a house, you could be getting a tenth back.
If you contributed just $1,000 to an index ETF (a portfolio that mirrors the market) each year, you would have:
- $7,715 after five years.
- $18,531 after 10 years.
- $35, 949 after 15 years.
- $64,002 after 20 years.
- $109,181 after 25 years.
- $181,943 after 30 years.
Instead of paying hundreds of thousands (maybe even millions) for home equity, you could have six-figure liquidity without the stress and hassle of owning a home. Plus, being a renter means you have more flexibility to move. Those numbers above were just for buying a home. There’s even more costs to sell it.
