Do you think the rent is too damn high? You might want to check out how much it costs to own a home if you need a mortgage to buy one.
A new report from LendingTree TREE, -1.84% compared the costs of renting versus homeownership across the 50 largest metropolitan areas nationwide. In every metro area studied, the monthly expenses associated with renting were more affordable than owning a home backed by a mortgage.
On average, renters paid $ 606 less than homeowners with a mortgage each month on housing costs, which also include utilities, taxes and fees. From city to city though, the difference varied significantly.
The difference in housing costs between renters and homeowners with mortgages was greatest in New York City, where renters saved nearly $ 1,400 a month. Residents in Orlando, Fla., meanwhile, stood to save the least by renting rather than using a mortgage to buy a home. There, the difference was just shy of $ 300.
As the LendingTree report noted, once the mortgage is paid off — or if a home is bought all in cash — it’s a different situation entirely. In those cases, renters pay more than homeowners who own their property outright in every city — demonstrating how mortgage costs can affect housing affordability, even when interest rates are so low.
“ In Orlando, renters only only saved around $ 300 on housing costs compared to homeowners who were paying off a mortgage. ”
Owners who are no longer paying a mortgage see the biggest benefit in San Jose, Calif., where the median housing cost for homeowners without a mortgage is only $ 792 per month. Comparatively, the median monthly gross rent in San Jose is $ 2,249, making the difference over $ 1,400.
“Although buying a home can be expensive, it can also be a good investment in the long run,” LendingTree chief economist Tendayi Kapfidze wrote in the report.
“The longer you stay in your home, the more equity you’re likely to build over time as your mortgage balance shrinks and home values appreciate,” he added.
The wealth accumulation is just one of the benefits of homeownership. People who own the property they live in also can benefit from tax breaks exclusive to homeowners. Plus, unless a unit is rent-controlled, renters generally need to prepare for fluctuating housing costs, as landlords can adjust the price of the rental over time.