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The traditional path for many homeowners in the United States is to graduate from high school or college, work for several years, and then use savings, or a parent's help, for a down payment on a house. The person then often buys a larger house at some point, selling their first house to another new home buyer and the cycle continues.
That model, however, is not set in stone, and many of Orion's brokers and real estate agents are seeing the potential of changes in the works as we enter the traditional buying “season” in 2025. The 2020-2021 pandemic changed things, and there are ample statistics showing that younger people are not as interested in owning a home as older generations, for example. And we could also be seeing a move from living in the suburbs to more of an urban lifestyle, perhaps near mass transit and without an automobile.
If one looks strictly at numbers, a potential buyer should analyze, with the help of a broker, estimating comparable for-sale prices and asking-rate rents on the typical home and then simulating transaction costs, home values, rents, insurance, property taxes, maintenance expenses, and mortgage dynamics into the future to determine if the household is financially better off renting or buying the same home.
The question of whether renting is truly cheaper than buying depends largely on your location, financial situation, and how long you plan to stay in a home. In many major metro areas, renting can indeed be less expensive upfront and in the short term. This is largely because renting typically requires a lower initial investment—usually just a security deposit and the first month’s rent—while buying a home involves a substantial down payment and closing costs.
Renters generally have fewer ongoing expenses to worry about, as they don't pay property taxes, homeowners insurance, or maintenance and repair costs. Their primary financial responsibility is the monthly rent payment, which can sometimes increase due to rent growth rates or rent increases stipulated in the lease agreement. Additionally, renters often pay for renter’s insurance, which tends to be more affordable than homeowners insurance.
On the other hand, homeowners face monthly mortgage payments that include principal, interest, property taxes, homeowners insurance, and possibly private mortgage insurance if the down payment is less than 20% of the home's purchase price. These payments can fluctuate, especially if the mortgage has an adjustable interest rate. However, buying a home allows for equity accumulation over time, which can offset some of the costs in the long run.
It’s important to consider factors such as the inflation rate, opportunity cost of the upfront cash used for a down payment, and potential tax benefits like mortgage interest deductions when evaluating the true cost of owning versus renting. While renting may save money in the short term, buying a home often makes more financial sense over a longer period, especially if home prices appreciate and you plan to stay put.
Ultimately, whether renting is cheaper than buying depends on your individual circumstances, including your income bracket, local rental prices, and how long you intend to stay in the home. Using a rent vs buy calculator can help you estimate the potential costs and savings based on your specific situation.
When deciding between buying and renting a home, it’s essential to understand the fundamental differences that affect your finances, lifestyle, and long-term goals.
Buying a home requires a significant upfront investment, including a down payment, closing costs, and other initial costs such as inspection fees and mortgage insurance if your down payment is less than 20%. In contrast, renting typically involves a security deposit and the first month’s rent, making it more accessible with lower initial costs.
Homeowners pay monthly mortgage payments that include principal, interest, property taxes, homeowners insurance, and often homeowners association (HOA) fees. These recurring costs can fluctuate, especially if you have an adjustable rate mortgage. Renters, on the other hand, pay a set monthly rent payment, which may increase periodically due to rent growth rate or rent increases stipulated in the lease agreement. Renters also typically pay renter’s insurance, which is generally less expensive than homeowners insurance.
Buying a home allows you to build home equity over time through equity accumulation as you pay down your mortgage and if the home price growth rate is positive. This equity can be a valuable asset and a form of forced savings. Renting does not build equity; instead, your monthly rent payments contribute to your landlord’s income. However, renting provides greater flexibility to relocate without the burden of selling a property or paying selling costs.
Homeowners are responsible for all maintenance and repair costs, which can be significant and unpredictable. Renters typically are not responsible for these costs, as landlords handle maintenance and repairs, reducing financial surprises.
This is a topic that makes owning feel a lot less fun than renting: If something in your house breaks, there’s no landlord to deal with it. You own it, so you have to maintain it. This is part of why lenders like to see a substantial cushion in case of emergencies — and why regular upkeep costs should always be factored into your homebuying budget. Even if you’re handy and plan to do your own upkeep, you might not be able to commit to this level of maintenance over time. Be sure to get a home inspection to be aware of problems and potential red flags before you buy a home.
Homeowners may benefit from tax deductions on mortgage interest and property taxes, potentially lowering taxable income depending on your marginal tax rate. Renters generally do not receive these tax benefits, although some states offer limited renter tax credits.
Another factor for prospective buyers to consider is potential tax benefits. If you itemize deductions, you could lower your federal tax liability by taking the mortgage interest deduction. Talk to a tax professional about whether the mortgage interest deduction — the first $750,000 in mortgage interest for couples filing jointly; $375,000 if you’re filing solo — will make an impact on your bottom line.
Depending on where you live, you may be able to squeeze a small benefit from renting, too. For example, in Indiana, an eligible renter can deduct up to $3,000 of rent from state taxes. Other states offer tax credits based on other criteria such as age or earning a certain amount of income.
Owning a home gives you the freedom to customize and renovate your residential property to suit your tastes and needs. Renters usually have limited ability to make changes and must adhere to lease terms regarding modifications.
Understanding these key differences can help you weigh the pros and cons of each option and decide which aligns best with your financial situation, lifestyle preferences, and long-term goals.
When you’re renting, your landlord can opt to increase your rent and send shockwaves through your finances. They might even decide to sell, which could potentially leave you in the lurch. But if you buy a home with a fixed-rate mortgage, you won’t have to worry about fluctuating monthly payments as you could with rising rents. That kind of reliability can make budgeting and planning a lot easier.
Any homebuyer who’s financing the purchase will be required by their lender to secure a homeowners insurance policy. Depending on where you live, you might also be required to have additional coverage for floods, wildfires or earthquakes. That means living in a warm-weather, coastal paradise — like Florida or California — could cost you significantly more than you bargained for.
For tenants, it’s smart to have renters insurance, which protects personal possessions in situations like theft or fire and offers some liability protection. But renters insurance is much more budget-friendly than homeowners insurance.
Choosing whether to rent or buy a home is a significant decision that depends on various personal and financial factors. Asking yourself the right questions can help clarify which option aligns best with your current situation and future goals. Consider these key questions:
Reflecting on these questions will help you weigh the pros and cons of renting versus buying, ensuring your decision aligns with both your financial capabilities and lifestyle preferences.
The answer to the rent vs. buy debate isn’t cut and dried. It’s important to evaluate your current life situation and how much it’s likely to change in the immediate future — if you are moving to an unfamiliar city, have an unstable job situation or don’t know what neighborhood will feel like home, renting can be a great option. However, if you’re looking to settle down and plant roots, buying is likely a better option. Sure, you may pay more each month, but in the long run, you’ll accumulate equity that can put you in a strong position when you’re ready to sell. If you’re on the fence about which is right for you, it may be helpful to speak with a local real estate agent who knows your market well. An experienced agent can help you weigh your options and make a more informed decision.
It is hard to argue with economics, and the cost of being a homeowner in some markets where Orion lends is still less than that of being a renter, despite home price gains and mortgage rates higher in June of 2025 than they were in June of 2021.Buying a home may be cheaper than renting. It seems people who didn't buy a home last year in 2024, or 2019, or whenever, may have missed the bottom of the market, but they haven't completely missed the boat. Even buyers who can't get 2020rates will still find that buying makes more financial sense than renting in nearly all local markets, so long as they can obtain a mortgage in the first place.
A consumer should buy if they are confident they will, or can, stay in the home long enough for the financial benefits of buying their primary home to overcome the lower upfront costs of renting the same unit and investing in stock markets. (This is the breakeven year.) In addition, they consider the “price” of selling before the breakeven year worth whatever value they place on having full control and the option to customize the property during that time.
The decision of “buy versus rent” can be complicated, and involves psychological, financial, tax, and life planning choices. This is exactly the reason for borrowers to use a broker to help them through the decision making. And experienced brokers know that providing sound advice, even if the potential buyer decides to continue renting, is the best in the long run.
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