Why Your Rent Is Often More Than a Mortgage Payment

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Renters frustrated by headlines about the hot housing market that make it seem like this is their last chance to buy property won’t exactly be comforted by reports that rent payments are currently exceeding average monthly mortgage payments. But comparing the costs of owning versus renting on a monthly basis isn’t quite that straightforward, since homeownership carries with it a bunch of hidden costs. In fact, there are arguably advantages to sticking with renting even as home prices go through the roof.

Why is rent be higher than the cost of a mortgage?

Commenters in this Reddit thread put it best: “Your rent is the most you’ll ever pay each month. Whereas your mortgage is the least you’ll ever pay each month.” Why would that be so? Well, homeowners have to cover the cost of expenses that a renter won’t have to pay, at least not directly:

• Property taxes: $2,471 each year, on average (and much, much more in some areas)
• Monthly HOA fees: $250 per month, on average
• Repairs and maintenance: $170 per month, on average
• Homeowners insurance: $80 per month, on average
• Utility bills: $200 per month, on average
• Private mortgage insurance: $160 per month, on average
• Lender-required flood insurance: $61 per month, on average

Other possible charges can include: trash pickup, water and sewer service, pest control, tree trimming, amenity maintenance, and earthquake insurance. Landlords still pay these costs, of course, but a lot of them are baked into the cost of rent.

Of course, as any jaded renter knows, you can get stuck with a cash-poor or otherwise cheap landlord who skimps out on repairs and pest control. Nevertheless, the costs are real, and they’re on top of what an owner pays in mortgage payments (a more detailed breakdown can be found in this Lifehacker post).

That all said, pity is not required—homes are also assets that tend to grow in value, often above 10% annually, so they are quite valuable even given the ongoing costs of owning them.

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Why renting isn’t all that bad

Cost certainty and flexibility are underrated aspects of renting. When you rent, you know exactly how much you’re going to spend on housing each month. Unlike a homeowner, you don’t have a 30-year mortgage commitment to worry about, and you don’t have to pay for surprise expenses like a new HVAC or boiler at a few thousand a pop—at least not directly. The other advantage to renting is that unlike homeownership, it’s much easier to move when you change jobs, grow your family, or come across a better, cheaper place to live. That doesn’t make renting more affordable, of course, but it does have its advantages.

How to know if your rent is too high

Research and compare rental rates for similar properties in the neighborhood where you want to live, and determine the average monthly rate for an apartment the number of bedrooms and amenities you are looking for. This is also how many landlords determine their own pricing, so use your research as leverage to negotiate a lower monthly rent. If you don’t like what’s being offered, you’ll at least have the flexibility to look elsewhere.

Also worth mentioning, here: if you’re behind on your rent payments as a result of the pandemic, consider your rent assistance options, as outlined in this Lifehacker post.

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