14 Cities Where It’s Cheaper to Rent Than Buy
In places like Atlanta, Austin and Boston, it’s cheaper to rent than it is to buy in the short-run. Your monthly payment will be less through renting than through buying.
While renting is a cheaper short-term housing solution, buying is a path toward not paying a monthly fee at all – aside from HOA and taxes as applicable.
If buying is currently not the best financial move for your family in these places, you may want to consider rent to own to save up for a larger down payment on your dream home – or maybe even buy the place cash!
In this article, we’ll list the top 14 cities where renting is cheaper than buying, based on information from a Go Banking Rates study.
1. New York, New York
The state of New York has one of the top 10 highest average mortgage payments in the country, according to a Lending Tree study. Residents of the state pay about 15.06 percent of their income toward their mortgages. The median mortgage cost in the city is $4,066. The median rent cost is $2,500,
However, the median mortgage costs in New York City is much higher than the average in the state as a whole.
Nonetheless, it is $1,566 cheaper to rent in New York City versus buying.
2. San Francisco, California
In San Francisco, it is much cheaper to rent than it is to buy, which is not surprising considering that California has the second highest monthly mortgage costs in the country, as per the above-mentioned Lending Tree study.
Renters in San Francisco save $1,236 per month. The average monthly rent is $4,500, while the average monthly mortgage is $5,736.
To afford the median mortgage in this pricey city while following the 30 percent rule, a buyer would need to earn $229k each year – and that’s before factoring in HOA, taxes and insurance, which are all factors that lenders consider.
It’s not much better for renters. A renter that earns less than $180k and pays the median rent payment is cost burdened.
3. San Jose, California
Like in San Francisco, renters in San Jose save a lot of money compared to buyers. Renters in San Jose save $1,235 per month by renting homes instead of buying them, but that doesn’t mean rent comes cheap. The median monthly rent in San Jose is $3,500, while the median monthly mortgage payment is $4,735.
4. Seattle, Washington
Renting in Seattle is significantly cheaper than it is to buy. Renters save $753 a month. The median monthly mortgage in Seattle is $3,553, while the median monthly rent is $2,800.
The state of Washington has one of the top ten highest mortgage costs in the country. Overall, residents pay an average $1,196 per month for their mortgages. That amounts for about 15.58 percent of their income, according to the Lending Tree Study.
5. Honolulu, Hawaii
It’s $565 cheaper to rent in Honolulu versus buying. The median monthly rent here is $2,700, while the median monthly mortgage is $3,265.
Overall, housing costs are expensive in Hawaii, it might make sense to fork out an extra $585 in order to pay nothing (except taxes and HOA, of course) when you reach retirement.
6. Oakland, California
The median monthly rent payment in Oakland is $2,800 – $515 less than the median monthly mortgage payment. The median monthly mortgage payment is $3,315 per month.
7. Long Beach, California
Long Beach is pretty close to Las Angeles, but the cost of housing is about $1,000 less whether you rent or buy. Renting is $369 cheaper than buying.
The median monthly rent payment is $2,448, while the median monthly mortgage payment is $2,817.
8. San Diego, California
Renters in San Diego save about $342 per month. The cost of a median monthly mortgage payment here is $3,292 and the median cost of rent is $2,950.
9. Raleigh, North Carolina
In Raleigh, it is $327 cheaper to rent than it is to buy. The median monthly rent here is $1,400, and the median monthly mortgage is $1,727.
10. Portland, Oregon
In Portland, the median monthly rent is $1,950 and the median monthly mortgage is $2,266. That means that renters pay $316 less each month than buyers.
Median monthly mortgage payments in Dallas are $1,943, while the median monthly rent payments are $1,650. The difference between the two accounts for a $293 monthly savings for renters.
12. Boston, Massachusetts
Payments in Boston, Massachusetts are not as reasonable. Boston has the fourth highest rent prices in the country and the fifth highest mortgage costs.
The median monthly mortgage in Boston is $3,689, while the median monthly rent is $3,400 – a $289 difference. Based on that differential, it might make sense to buy even though it is pricier to reach a point where no payment is required as soon as possible.
For every extra year that you rent you spend $40,800 at current prices, and rent typically rises with inflation! If you lock in your mortgage now, you’ll pay $3,689 for the duration of it.
Overall, Massachusetts is an expensive place to purchase a home. Without factoring in HOA fees, taxes or utilities, the average person spends 14.5 percent of their income on their mortgage, an average of $1,333 per person. According to a Lending Tree survey, that is one of the top 10 highest costs in the country.
13. Austin, Texas
In Austin, the cost difference is a bit wider. The cost difference between renting and buying is $158 per month. The median mortgage in Austin is $1,853 and the median rent is $1,695.
14. New Orleans, Louisiana
It is $122 cheaper per month to rent a home in New Orleans than it is to pay off a mortgage for one. Median monthly mortgage payments in New Orleans are $1,487, while median monthly rent payments are $1,465.
Should You Buy, Rent or Rent to Own?
It’s important to remember that in the long-run (i.e. 30 years) your monthly mortgage payment would disappear entirely once a mortgage is paid off in full.
In places like New York City, where the difference between buying is $1,566, it may not make sense to purchase a home because it will take an extra 19 years to break even before you start considering additional taxes and HOA fees.
However, in places like New Orleans, the extra $122 a month in mortgage costs will be well worth it once you’ve paid it off. Especially when you consider the permanency of your monthly mortgage payment against the possibility that rent will increase in the future.
If the cost differential between renting and buying is too much for you, or if you don’t have a large enough down payment saved up just yet, consider rent to own. Rent to own is an easy way to start building equity in a property while saving up for a down payment. It’s a midway point between renting and buying.