Mortgage Myths Debunked: Renting is Cheaper than Buying

9 de octubre de 2024

by Christian Phillips

There are many mortgage myths about down payment requirements, interest rates, credit score expectations, and more. A common belief among many potential homebuyers is that renting is more affordable than purchasing a home. Let’s dig into the facts based on today’s market value and discuss the pros and cons of renting as you consider your first home purchase.

For Midwest residents, renting can be more costly than investing in a house, depending on size and location. Whether you are looking for a studio apartment or something with 1 to 3 bedrooms in the urban or metro area, here is what you can expect to pay.

As a current renter in the Twin Cities, paying more than $1,500 monthly for rent is very easy. Investing that same amount in a mortgage payment would allow me to at least build equity in an investment.

Rental Market Trends: Credited to Apartments.com

North Dakota:

Apartment Style	Average Rent
Studio	$768
One Bedroom	$915
Two Bedroom	$1,085
Three Bedroom	$1,433

Minnesota:

Apartment Style	Average Rent
Studio	$1,093
One Bedroom	$1,291
Two Bedroom	$1,586
Three Bedroom	$1,974

Wisconsin:

Apartment Style	Average Rent
Studio	$1,054
One Bedroom	$1,186
Two Bedroom	$1,388
Three Bedroom	$1,820

Building equity is relatively simple for those who need clarification on what that means. Equity is the difference between what your home is worth and what you still owe your lender. So, as you pay down a mortgage, you hope the value of your home increases, allowing you the chance to build and sustain equity.

The Potential Pitfalls of Renting
Renters have minimal freedom in terms of controlling their environment. If you simply want to paint your residence, you must ask permission. If there are maintenance issues, you may have to jump through hoops with your landlord to address them adequately.

You do not build equity when you rent: Instead of investing your money in your home, the landlord receives all the financial benefits of property ownership.
Lack of control over monthly payments: If the landlord decides to increase the rent after your lease ends, there's little room for negotiation.
Housing security: If you know you’re going to be in an area for a long time, you may not be able to stay in the same home. If the landlord sells the property, there’s no guarantee you will be able to renew your lease.
Pets: When signing a lease agreement, the landlord may prohibit pets. This can limit your rental options if you have pets.
Unresponsive landlords: Some landlords are slow to respond to maintenance requests, causing frustration and dissatisfaction.

Gain More Freedom with Homeownership
When you become a homeowner, you gain more freedom to do whatever you want with your property. You are no longer constricted to a landlord's rules. If you want to paint, knock a wall down, or replace fixtures, you can. Most importantly, you are building equity.

The Reality of Renting in Today's Market
If you can afford to rent in this market, you can likely afford a mortgage payment. With available resources for first-time homebuyers, such as loan programs and down payment assistance, there is no excuse for not transitioning to homeownership. Why would you want to continue building equity on your landlord's behalf?

Frandsen Bank & Trust makes it extremely easy to determine your buying power. Visit your local Frandsen Bank & Trust location and ask a lender to start a prequalification process. This will help you determine affordability based on your financial information.

Frandsen Bank & Trust believes future wealth starts at home. Our dedicated community development loan officer, Lance Elliot, specializes in assisting first-time homebuyers. Discover more about Frandsen Bank's first-time homebuyer loan products and downpayment assistance programs at frandsenbank.com/ownyourhome/ Equal Housing Lender NMLS 1991339

Mortgage Myths Debunked: Renting is Cheaper than Buying

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