One of the reasons people opt not to buy a home is a straight home mortgage versus renting comparison. In many cases, people evaluate their rental and buying options, and decide that they pay less in rent than they would in buying a home and continue to rent. Unfortunately, you’ll pay more in rent in the long run, and you’ll miss out on valuable opportunities to build a financial future for yourself.

Rent and House Payments are Not Equal

Don’t make the mistake of assuming that rent and home payments are equal. When you own a home, you’re eligible for tax deductions and other potential savings that add up versus making a rent payment. If you currently pay $800 per month in rent, you may be able to afford a home payment of $1,000 or $1,100 after tax deductions and other cost differentials. Don’t assume that mortgage payments and rent payments are the same thing, because they aren’t – you typically have more buying power with a mortgage payment.


Rent Increases will Cost You More

When you evaluate renting versus buying, you’ve got to look at the long-term picture. Buying may cost you more today, but your rent payment isn’t fixed. Typically, rent goes up at a rate of 4 to 8 percent, depending on where you live. Assuming you live in a high-inflation area, a rent payment that costs you $1,000 per month will cost you nearly $2,000 in 10 years. In 20 years, you’ll be paying over $3,000.

Contrast that with a home mortgage. If you get a home mortgage with a fixed interest rate, you know what your payments will be for the next 30 years. You may be paying $1,200 on your mortgage, but you’ll still be paying $1,200 in 20 years when your rent would be over $3,000. Renting may seem cheaper up front, but it certainly isn’t cheaper when you do the long-term math.