You’ve seen the numbers. Mortgage payments today are often higher than rent. Should you bite the bullet and buy anyway, or keep renting and save? The answer depends on more than monthly payments. It comes down to costs, long-term benefits, and your personal plans.
Breakeven: When Buying Overtakes Renting
The breakeven year tells you how long it takes for buying to pay off compared with renting.
- Mortgage rates shape breakeven. At 3%, it takes roughly 2.2 years. At 6.5%, it stretches to almost 4.7 years.
- Transaction costs matter. Fees, taxes, and paperwork add up. Reducing these can shorten breakeven time.
- Your stay matters. If you plan to stay longer than the breakeven year, buying may be financially better. If not, renting likely makes more sense.
Actionable step: Calculate your breakeven year using current rates, expected stay, and realistic transaction costs before deciding.
Upfront and Monthly Costs vs. Rent
Mortgage payments are only part of the picture. Real costs include taxes, insurance, and maintenance.
- Down payment and fees are high. A typical 20% down payment plus 3% of the home price in transaction costs is standard.
- Recurring expenses add up. In 2024, the average U.S. homeowner paid over $18,000 per year beyond mortgage principal and interest. That’s $1,510 monthly.
- Renting is cheaper in some markets. In early 2025, median homeownership cost ($3,037) exceeded average rent ($1,827) by $1,210 per month.
Actionable step: Compare total monthly costs of renting versus buying, not just the mortgage, to see which fits your budget.
Investment Benefits of Homeownership
Buying a home is an investment as well as a place to live.
- Leverage amplifies gains. With 20% down, you benefit from appreciation on the full property value.
- Mortgage as forced savings. Over time, more of your payment goes to principal, building equity.
- Fixed-rate stability. Your principal and interest stay stable, protecting against rent increases or rising rates.
- Refinancing potential. If rates drop, refinancing reduces payments.
- Wealth gap evidence. Homeowners hold around $231,420 in household wealth versus $5,200 for renters.
Actionable step: Consider homeownership as a long-term wealth-building tool, especially if you plan to stay in the property for several years.
Tax Considerations
Tax benefits make buying more attractive, though they are limited for many households.
- Capital gains exclusion: Exclude up to $500,000 profit if married or $250,000 if single on a primary residence after two years.
- Mortgage interest deduction: Deduct interest on acquisition debt up to $750,000 for new loans.
- Limits exist. Standard deductions and SALT caps reduce the impact for many middle-income buyers.
Actionable step: Include potential tax savings in your calculations, but do not rely on them as the main financial reason to buy.
Opportunity Costs and Risks
Buying a home ties up money that could be invested elsewhere.
- Down payment opportunity cost: That money could earn returns in the stock market.
- Renting and investing: Investors who rent and invest the difference may outperform buyers, especially in markets with high price-to-rent ratios.
- Liquidity challenge: Homes are illiquid. Selling quickly incurs costs and delays.
Market conditions matter. Conservative models show disciplined renters can accumulate more wealth in certain scenarios.
Actionable step: Compare potential returns of renting plus investing against buying before committing to a mortgage.
Lifestyle and Non-Financial Factors
Money isn’t the only consideration.
- Control and customization: Ownership allows changes and upgrades.
- Stability: Owning eliminates landlord risk and rent spikes.
- Sweat equity: Improving your home increases value and satisfaction.
Actionable step: Weigh lifestyle benefits alongside financial analysis. They may justify buying even when costs are higher.
Bottom Line
Paying a higher mortgage can make sense if you plan to stay long enough to reach breakeven, benefit from equity growth, and value stability and control. Renting may be better for short-term mobility, lower monthly costs, or investing the difference.
First-time buyers should calculate breakeven years, total monthly costs, potential wealth accumulation, and lifestyle impact before deciding. Your choice is personal, but informed decisions balance numbers and priorities.