I’ve heard this my whole life – that “renting is throwing money away” and you should buy a house as soon as you can. But now that I’m older and actually looking into it, it seems way more complicated?
Like, yeah, when you rent you aren’t building equity, but when you buy you’re taking on a lot of extra costs too. Property taxes, maintenance, repairs, insurance… it adds up fast. Plus if you don’t stay in the house long enough, you might not even come out ahead after realtor fees and closing costs.
I’m asking because I’m at a point where I might be able to buy in the next year or so. I’ve been saving aggressively since 2020, managed to build up a decent emergency fund, and had some extra income come my way recently through a side hustle and a couple of lucky breaks. It’s the first time in my life I actually feel somewhat financially stable.
But even with that, the idea of buying kind of freaks me out. I don’t want to get into something just because it’s what “you’re supposed to do” if it might not even make sense financially.
So… is it actually true that renting is wasting money?
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renting is not throwing money away. you’re paying for a place to live — a roof over your head, flexibility, and often less financial risk. buying a home can build equity over time, but it also comes with massive upfront costs, ongoing expenses, and potential market risks.
the “renting = wasting money” idea comes from older generations when housing was much cheaper and home ownership was more universally profitable. today, depending on your location, job mobility, and personal goals, renting can be the smarter, safer, and more financially sound option.
the real waste of money would be buying a house that doesn’t suit your life or traps you financially just because it was “the thing to do.” you’re already thinking about it the right way — it’s not a one-size-fits-all answer.
In general, paying a mortgage instead of rent builds wealth over time in a way renting doesn’t. There are absolutely situations where renting makes more sense for people but very generally, it’s financially better over time to own. Look at it this way, when you’re renting, your landlord is paying a mortgage and all of those costs you mention, plus usually making a profit off of the rent on top of that. If the rent didn’t cover the costs of the unit, it wouldn’t make sense to have a rental unit.
Renting is “wasting money” in the sense that it’s not generating any wealth for you. Owning a house and paying a mortgage is giving you a valuable object and generating wealth for you, while renting is just paying a fee for a service.
it’s “wasting money” in a sense that you are providing your future self with no extra money.
if you have a house, you pay a mortgage that future you can eventually sell for some extra money, houses basically always go up in prices long term (they can dip now and again, but in 10, 20, 30 years, they will always go up).
Also when you rent, you are taking things like property taxes as your own as well. it’s just added into your rent without you knowing. Cause the whole point of being a landlord is to make a profit, so the rent needs to cover property taxes, insurance, and an estimated value of maintenance, plus some extra for profit
Everyone said this to me before I ended up deciding to buy my house. While it’s not wasting money as it gives you your own space and place to live it is in the UK very expensive to rent at the moment. Buying is also secure in that your landlord can’t suddenly hike your rent or sell
For example my mortgage is £590pm for a 3 bed house but renting the one 8 doors up is up for rent for 950pm, owning obviously comes with the trouble of deposit credit score etc but suits some.
Honestly think alot yourself and see how it goes. I’ve owned now for 5 years and had no major home maintenance to pay out for just decorative stuff I’ve wanted to do.
Renting is a waste of money just like how buying food is a waste of money.
Having a place to live is a basic necessity, like food and water. If you don’t have the means to purchase a house or condo or whatever, renting is the alternative. So if you consider keeping yourself alive, while also not building capital a waste of money, you’re probably an elitist asshole born into a rich family. Or you’re a boomer who paid $17 for your $800,000 house.
It is quite complicated yes. Just some things though:
>Property Taxes/Mortgage/Insurance
The actual cost of these is going to vary wildly based on location, but the combined monthly cost is usually comparable to just the cost of “rent” in most cases, and can be better/worse depending on the terms of the mortgage (Example: I pay ~$780 a month for my home, but most rentals in my neighborhood for similar sized homes are ~$1000).
>Maintenance/Repairs
This is honestly likely the more bigger cause for concern with “additional costs” compared to renting. I’ve had to replace my water heater and had a few plumbing mishaps, so I’ve spent like an extra $1500 on that alone. Granted, this is over a 4 year period, but it’s still costs that someone who is renting would not incur.
>Being tied down
Owning a house makes it harder to move, because typically you would have to sell to have the money to then move somewhere else. Renters can just choose to not renew their lease, and most lease agreements aren’t super long.
>Risk of eviction
The nice thing about owning a home is that, assuming you get a fixed mortgage, your monthly payments are more or less pretty stable. Property taxes tend to go up, but it’s usually never a huge shift all at once. Rentals however, are subject to the whims of the landlord, who could one day decide that to renew the lease, your rent goes up $500. Or they could just decide they don’t want to rent anymore and you have to find some place new after your lease agreement expires. So there’s a bit of risk, depending on the climate.
It is in a sense, but so is buying if you’re not going to stay there for at least 5 years or so.
The math is pretty complicated. You have to factor in how much you’d pay for a down payment, how much you could earn in investments if you just invested it vs. buying a home, the cost to sell your house when you move, property tax, interest on the loan, home value appreciation……
There’s probably a calculator out there that can do the math for you.
>but when you buy you’re taking on a lot of extra costs too. Property taxes, maintenance, repairs, insurance…
Surely you understand that your landlord is paying for all of this stuff and making a profit off of your rent right?
If you would be living in the same area long term and spending a roughly similar amount of money on housing whether its rent or a mortgage…yes.
Those are pretty big ifs, though.
Owning builds wealth through equity.
Buying a house is putting money into a fairly unreliable bank account while keeping warm.
Renting is burning money to keep warm.
Both have their ups and downs, but lifetime renters are going to have a much harder time ever retiring.
My property tax is more than my rent was.
Sorry, just got the bill and it hurts.
Renting is throwing money away like buying milk is. Just buy a cow
No. You’re not throwing money away, you’re paying money for something you need. And you’re right that homeowning is itself quite expensive, up front and on an ongoing basis.
But it is true that homeowners have a lot of political power and they tend to use it to benefit themselves, so if you’re not part of the class “homeowner” or “landowner” you’ll be on the losing side of that political struggle. So there are definitely benefits to homeownership. Owning your own home means you will never experience your rent increasing because the landowning class lobbied to cut off potential for new development, or burden construction with so many regulations that it’s unprofitable, choking off the supply of rental housing near jobs.
Is buying food “throwing money away”. Or is money supposed to be exchanged for something you want? Like food or shelter?
It depends on your personal situation and goals in life.
Having rented and owned…no. it’s all what you want to do later in life. Sure, calling a home your own is nice but as with most people the bank will own it for 30 years, and you are stuck fixing any issue. With rent the owner owns it and fixes the issues. Sure the rent may go up but so do repair prices and replacement appliances. I’m getting closer to retirement and rent. Don’t want to feel tied down to one place forever.
If renting and owning cost the same in the long run they’d be right. But owning costs a lot more. The extra costs of owning are what builds equity.
No, because spending some amount of money for s place to live is better than having no place to live
However, if you can comfortably afford a place of your own then that might be better in the long run
It’s a pervasive myth based on how affordable it was to buy homes historically. Housing is a commodity and an essential need; whether you rent or buy, the main function is to provide yourself shelter. While home ownership has historically been a “good investment” this actually contributes to the housing affordability crisis (e.g. everyone wants their home value to go up when they own; but the more prices go up, the fewer people can afford the cost of homeownership)
The New York Times has a great “Rent vs Buy” calculator that can offer some additional clarity and cost considerations.
Mortgage will not increase year over year. Rent will increase. Eventually the mortgage will be paid off. You will always have to pay rent. In 30 years you’ll be glad you purchased
I feel that when you rent, you are paying someone else’s mortgage. When you leave, you’ve spent all that money, but have nothing tangible.
If you buy, you’re building equity in something that you can turn around and sell one day.
The time that it might be more beneficial to rent is if you’re a retired senior and the cost of rent really pays off in terms of not having to about the upkeep on a property.
I really like having a roof, walls, doors and windows…
Renting is significantly cheaper than owning a house.
Mortgage, property taxes, + other bills… it adds up.
The answer to a lot of questions like this is “do the math”. You’re absolutely right that you need to account for all those other costs.
Don’t assume. Do the business case for both options and see which one actually comes out ahead at 10 years, 20 years, etc.
Renting and leasing a car will always be throwing your money away.
It depends. I’m looking to have a shop, but can’t afford to buy a building. If I rent, which I can’t seem to find any available, it’s $2500+ a month less I’d make. That’s also a pretty steep payment.
I could buy a home a put a big garage in the back for similar amount of money and assuming I repay the loan I get to keep it.
It used to be, it depends on the housing market and the area you live in. Renting is cheaper but you don’t build “equity” which is a when the value you accrue when you pay off a house, which in turn becomes money you can recoup if you sell the house, while rent goes directly to the landlord with no recourse once you spend it.
When you own you’re responsible for mortgage/loan payments, property taxes, and property maintenance. Renters don’t have to pay these expenses which can make it easier depending on where they live and absorb minimal risk (security deposit) if something goes wrong with the property.
How much are you paying in rent?
Do you have roommates?
Are you using this to pay down credit cards and student loans down to 0?
Do what’s best for your situation. It’s not throwing money away if buying house is not to your advantage.
It typically works out better to rent in major cities because these properties trade at such low yields that you can get more bang for your buck investing your capital in other assets.
There are definite pros to renting. For one, you can move whenever you want. And also you’re not responsible for maintaining your apartment. Your landlord is. Which saves you money.
Are you renting + maxing your 401K, HSA, IRA, contributing to a brokerage in VOO or VTI, have a healthy emergency fund in a high yield, etc? If you’re doing all those then yea renting doesn’t really matter at all.
Have you ever heard the term “money pit” where it pertains to houses? That’s just as popular as the saying “rent is throwing money away.”
A house is a liability. It requires money going out of your accounts monthly, forever. You can only realize equity at sale time. If you plan to live there forever, you will never realize any profits. Your heirs will, but there are better ways to build wealth that you can actually tap during your lifetime. Namely, renting and investing your down payment and about $1000 per month over the same 30 year timespan as you would pay on a mortgage.
Rent is paying a monthly fee for the use of a house. That’s all. It’s like any other commodity. Think of it like that, rather than as throwing money away. You are getting something VERY valuable from rent money. Throwing it away implies getting nothing in return. That’s just not an accurate way to look at it.
depends what you do with your income not devoted to rent
In some places and under certain circumstances it’s actually better, financially speaking, to rent.
For example in my area apartments already shot up in value years ago and now they “only” increase by 1-2% every year. On top of this while smaller apartments rent for about 5-6% of their value yearly bigger apartments can rent for about 3-4%.
So, in theory, you could invest the money instead of buying an apartment and make about 8% per year while renting one of these big apartments and you’d make a profit. It doesn’t seem big but you also gotta remember you don’t have to pay for property taxes or anything like that and repairs are out of the owner’s pocket.
So no, it’s not throwing money away. And even if renting makes less financial sense there are still other benefits like peace of mind from knowing you don’t have to deal with any possible catastrophic issues and if you ever want to move you don’t have to worry about listing your property and dealing with all that.
That whole mentality is from years ago when renting was genuinely a bad play, over here a mortgage could be $300 for a small apartment and that place would be renting for $500 so people just kept buying more and more since it was basically a money printer, wish I was doing that rather than in kindergarten lmao.
Do the calculation for how much money you “waste” in interest with a 30yr mortgages.
Around 6-7%, a $200k house actually costs $400k because of the principal plus $200k in interest.
Whether renting or buying is right for you depends on a complex mix of factors like interest rates, house prices, location, qualifying for special programs aiding home purchases, ability for a down payment, ability to get a mortgage, etc.
A lot of renters would love to buy a house and can afford the payments (which are usually lower than rent) but don’t qualify for a mortgage.
Is buying food throwing away money?
If you live in the boomer fantasy world where any real estate investment is a automatic cash cow, it makes sense. But we don’t live in that world anymore.
Let’s say I drained my savings to make a down payment. With current interest rates, I’d STILL be paying more per month on my mortgage than I do on rent. The housing industry is in a giant bubble – so it’s likely that my investment would lose value. While also paying more per month. And being responsible for all maintenance. And all the other opportunities lost because your cash is tied up in land. There is no upside.
If renting is “throwing money away” then buying a home in this market is lighting your money on fire.
In a similar position where I can probably purchase something in the next year or 2, and since it’s such a big decision I’m thinking a lot about opportunity costs…
I definitely don’t think renting is throwing money away because, as others have said, you’re paying for a place to live. Owning like you mentioned comes with a lot of extra costs, so depending on where you live and what your goals are one makes more sense than the other.
I live in a VHCOL area and for me buying a home only makes sense if you don’t consider it an investment. Sure, the home will probably appreciate over time and your net worth will go up, but that wealth is illiquid and you can’t access it very easily. What happens when your income drops? Since I very much value flexibility and my rent is relatively low compared to a mortgage + everything included with home ownership, investing the difference in the market or myself makes more sense from a hard numbers perspective.
At the moment, for me, buying a home would fulfill an emotional / psychological need more than helping me reach financial goals. So yeah if I see a great deal on a home, I’ll probably go for it given my ducks are in a row, but it’d have to be pretty compelling since my overhead while renting is relatively low.
1 – This is all dependent on where you live.
2 – Do this. Get a spreadsheet and note down the costs. Map this out for the rest of your life, say 50 years. Map out renting vs owning. Remember that after about 20 years you’ll stop paying your mortgage.
Unless you live in a country where life time renting is normal and rent is controlled, the most likely answer will be that buying and buying as early as possible is the best idea.
This seems like an unpopular opinion but in the long run owning property is nearly always the winning move.
Sure, there are objectively many advantages to renting and many disadvantages to owning. But if your analysis is strictly money wise, you lose 9 times out of 10 by renting.
The biggest money problem with renting is that you are insanely vulnerable to rent hikes. It is insanely unpredictable and people who tell you otherwise are lying. With a mortgage you are able to lock a monthly payment that will stay the same for many years.
Renting is like buying a bag of apples at the grocery store every month. It’s not wasting money because now you have apples.
Owning a home is like planting an apple tree. It often takes time before your investment pays off, but then you have all the apples you want for life with just the initial investment.
No. Interest on a mortgage is similar
Bold to assume you aren’t paying for property taxes, maintenance, repairs, and insurance through your rent lol
Reality is that buying a house is the largest financial commitment of your life behind starting a family. And you’re right that there are a LOT of expenses, some predictable, some not predictable. But it’s also an appreciating asset unlike a car, and provides stability and control that you cannot get from renting.
So is renting throwing away money? No, in many scenarios it is not. At the same time, a house is an investment just like the market, and generally time in the market nets your greatest gains.
Renting is giving someone else money for a service. But so is paying interest on a mortgage.
You need to look at your actual circumstances, there isn’t a one size fits all.
Yes. But sometimes it’s necessary. I will personally never rent. I would rather own a cheap piece of land and sleep in a tent than give some person $1000 a month that I really get no benefit from. Put your money to work for you, even if it’s just a few wooded acres. Spend your free time cutting down the trees and clearing the land, and then you can build your own house or sell it for a profit.
Oftentimes, buying a house can be akin to throwing money away. One will buy a house, decide that’s not where they want to live, and then find out that no one wants to buy that house, leaving them trapped there.
Owning your own property builds your wealth. Renting just builds your landlord’s wealth. Owning is much better in the long term.
Renting seems to be a good idea in many situations. I actually have considered renting and own a house just to get out of the area
Not always. There are situations in which you are throwing away more money to own. It’s very situational and personal and depends on your circumstances.
There are people who will die on the hill trying to argue that renting is always the worst financial decision. It is not always worse.
Your wise to question this, and you should do lots of math and projections to see what really suits you. There’s also the cost of being trapped in a location. It makes jobhunting more difficult. It makes lifestyle, freedom choices, more difficult. You can’t just up and move on a whim. If you’re renting, it’s much easier to make life changes. Owning a home can be an expensive trap.
I have chosen to not own, and to live with roommates in rental apartments. I currently live in a beautiful apartment in Manhattan in New York City and I pay $1200 a month for my own private room in a beautiful clean apartment with windows overlooking a park if I tried to buy in New York City… I would be reluctant to buy something this large. If I decided to buy in New York City, my pricing would be outrageous. But here I am renting and I have a 12 minute ride to the center of town on a subway that’s literally downstairs so I don’t even have to walk in the snow.
I would have to pay four times this to live in a place 1/4 of the size if I decided to buy. And then I’d have to renovate and do upkeep and do all sorts of other things.
I’ll say it again: There are people who will die on the hill trying to argue that renting is always the worst financial decision. It is not always worse.
And with the money I saved, I’m able to invest aggressively for the future. Owning m property is not necessarily the best, or the only, way to build capital.
Absolutely not and people who say things like that are stupid. In many VHCOLA’s the break-even on buying over renting can be 10+ years. If you are building your career, moving, etc. then renting and investing money in the market is a FAR BETTER decision.
Renting: not wasting, just cash with different dash
The real estate industry wants you think that. Get a house if you really want a house. Otherwise, invest the money you’re saving by renting.
I owned a home for a while and then sold and went back to renting. The argument is usually that you’re “throwing away money” because you’re not building equity. That’s all well and good, though in my experience building equity isn’t at all what it used to be, and owning a home is expensive beyond just the mortgage and insurance and all that. I think the more important question is what best suits your lifestyle. Do you want kids or maybe a lot of dogs? Do you enjoy home improvement and repair projects? Where do you like to live, in the suburbs or out in nature or in a city center? Do you have enough savings after buying to not feel stressed about at least a couple hundred in repairs and gutter cleaning and other random maintenance every year? Do you feel overwhelmed think about the logistics of organizing those repairs yourself?
Owning a home ended up not feeling like a good lifestyle fit for me and I’m much happier renting an apartment in the city center and enjoying walking to amenities that are important to me.
Depends on your situation.
My parents are of the generation who believe(d) that to their core. When they downsized, they rented for 6 months because they couldn’t find a forever home, then bought a place “temporarily” while they searched.
They found their forever home and liquidated all their assets to purchase it, because the temporary home didn’t sell. Now they have 2 houses, and the first one is on the market for £100k less than they bought it for. If they cannot sell in another 2 years, that’s another £18k in stamp duty.
I’m pretty sure £118k is more than they would have paid out in one years rent.
Yes
At the end of the mortgage, say 30 years, you have a house and a piece of property; a renter has 30 years worth of paid-out checks.
It depends on the market and the timing. There are renter’s markets and there are owner’s markets.
To me, the big advantage of owning a home is that you more or less lock in your housing costs as soon as you buy a home. Even if you sell it, and prices have gone up, your home has gone up in value too, so you’re not frozen out of the market. It’s a wrinkle on the time-value of money idea.
My neighbors are original owners from the 1970s who bought their homes for peanuts. Today those homes are worth $1.7M. Their cost of housing is almost nothing compared to today, but in the ’70s it was the going rate. That is why in California we have Proposition 13 – so that long-term homeowners are not driven out of their homes by rising tax assessments. My neighbor’s assessed taxable home value is still only $106,851! They pay $1,700 per year while I pay $9,414 on $845K!!
I think a lot of people consider home ownership a form of forced savings – net worth goes up as they pay down their mortgage. Renting could be more fiscally attractive only if you still are able to save. A lot of people rent so they have more disposable income, which may cost them in the long run if they are not disciplined savers too.
If I sold my house today, I’d walk away with around $190k. I’m paying over $1k less for a mortgage than I would for renting the same house. I bought my house in 2014. I do not make extra payments.
The only thing you are throwing away is equity. The benefit of home ownership is not necessarily about payment. It’s about the amount of equity you build up over time and cash in when you sell it. Just like buying a business.
Yes. Renting is throwing money away. An easy $500,000 for 10 years.
My mortgage is $1400. To rent my same house in my market rn would be about $2800. I rarely have upkeep costs. The amount of money I save not paying a landlord, far outweighs my upkeep.
Rent is the maximum you’ll pay any given month for your housing expenses. Mortgage payments are the minimum you’ll pay any given month for housing expenses.
No. Owning housing can cost more over the long term than renting and putting your extra money (that might have gone to mortgage, HOA fees, and repairs) in stocks or bonds.
Technically yes, but it depends on your current living situation.
But also, too many people view home ownership as a for-profit game, instead of a for-people game. That’s why you’ll hear people say things like, “yeah, but after closing costs and taxes and realtor fees and maintenance costs, you’ll come out with less money, so it’s cheaper to rent.” (it’s not cheaper to rent in the long run btw)
Home ownership is not about making money. It’s about having a place to live. It’s not a business, it’s a service.
No one says the military lost money last year. They say it cost money last year. Because it’s a service.
Now, obviously, there are exceptions. Like if you’re a house flipper or something and buying/selling homes actually IS a business for you. But for most people, we’re talking about private ownership for the sake of not being homeless.
People with no financial literacy won’t really have an opinion on the topic.
People with minimal limited financial literacy will say yes it’s throwing away money
People with financial literacy will say it depends on many factors
Is it a better financial decision to rent or buy? That depends on a few factors.
Frankly, the most important one is how long will you be staying there. It is almost universally a bad idea to buy and sell your primary residence within two years. It is almost universally a bad idea to rent the same place for twenty years, if you could buy something similar.
This isn’t just because of amortization tables (most of your money in the early side of the mortgage goes to interest) but also because you will likely spend 15% the value of the house (or more) on buying and selling costs. If you have a career where relocating to another city is normal and a wise move for your career future and finances, you might want to get up the ladder before buying.
The second and third most important are location and the property itself. Property in undesirable locations can lose value over decades, and a property with serious issues can quickly bankrupt you. Meanwhile, increasingly desirable locations and “ugly” houses with strong fundamentals can set an average person up to be a millionaire in a decade or two.
This is a whole calculation with about 10 factors:
– How long you think you will realistically stay in that house
– Average home buying and selling related costs in your target area/neighborhood
– Comparable rent vs own prices in your target area/neighborhood/home
– Comparable own (mortgage/insurance/tax) and rent trajectories for your target area/neighborhood/home and any “deal” or “added cost” factors
– Mortgage interest rates/property tax rates/insurance rates there
– Other tax implications like mortgage interest deductions, homestead exemptions, reassessment taxes, etc.
– Projected household income trajectory in this time period
– Anticipated maintenance and upgrade costs of owning the house
– Projected sale price at time you believe you would move out, and principle paid at this time, of course.
– Projected market performance of alternative investments (if you put your down payment plus or minus the difference in rent or mortgage in the market over time, how much would it likely increase)
If you want to really make an informed decision, you need to plug all those estimates into some sheets and see what is right for your situation. But frankly, buying is really about five things:
Buy when you can answer all five of those questions with a solid “yes”.
When renting you’re spending a ton of money that goes into your landlord’s pocket so that they can eventually buy another home off of your rent. When making payments on a mortgage it’s like saving up money, because it goes into acquiring the home which will appreciate and eventually will come to hold more value than what you spent on it. If you decide to sell you get your money back with interest. If you don’t sell and you’re done with payments running maintenance/tax costs are overall much cheaper than rent and you have something to leave your kids.
But renting being “throwing money away” is too simplistic. The ratio between rents and house prices are not the same everywhere, and home loans are also not equally accessible everywhere and to everyone. And at the end of the day renting is about as money well spent as you can find. Having a roof over your head is important.
Yes. Once your mortgage is done, you just have bills and property tax only. When I realized my rent was the same as a mortgage payment, I stopped renting. Even if you take a 15-year mortgage at 25 years old, you will be done at 40 years old and have no rent, owm your home and just pay bills and property taxes. You can make extra payments throughout the year that go against the principle, and you can own your home in 10 years if you don’t have kids and are aggressive with payments.
There is no equity in renting, and you’re paying the mortgage for the landlord.
People are gonna rationalize it in every which. This is bottom line:
If renting means you can put away X amout of dollars every month you otherwise wouldn’t be able to put away if you owned – you should rent.
If owning means you can put money away – own.
If you break even on both ways, it’s up to a gamble in short term.
In the long term, holding onto an asset will usually mean you get ahead.
When you are fifty and look back at the cost of houses you could have bought at twenty, you will see why you should have done it, but that will be too late.
Buying a house generally gets people to change their behavior into something like delayed gratification/investment or at least a form of forced savings account. They also tend to spend more of their own time maintaining a physical asset of their own then they would while renting. Preservation of value is a form of savings. If you have and maintain those behaviors while renting at a total lower monthly cost and do well with the difference you will come out about the same or better.
Renting is not completely throwing your money away, but in the long run, it’s completely throwing your money away. If you’re not able to afford homeownership, it’s not a good option for you, but there’s no way rent is a fair deal in North America today.
What’s true is that home ownership is overrated.