Zillow Finds Mortgage Payments Lower Than Rent in 22 of 50 Largest Metros
(Illustration courtesy of Zillow)
A monthly mortgage payment is actually less expensive than rent in 22 of the 50 largest U.S. metros, according to a new Zillow Home Loans analysis.
“Recent dips in mortgage rates, which have fallen to the lowest level since early 2023, have significantly reduced monthly [mortgage] payments,” Zillow said in its latest Housing Market Report.
New Orleans, Chicago and Pittsburgh offer the greatest savings when comparing the cost of rent to a mortgage payment before taxes and insurance if a buyer can put 20% down, the report found. “For those who can put together a down payment, buying a home in these cities may be the right move,” Zillow said.
In Chicago, the typical rent payment is $2,074 per month, but a monthly mortgage payment is $1,640 — a savings of $434 a month by owning rather than renting. In New Orleans, homeowners can also save nearly $450 a month paying a mortgage rather than renting, and in Pittsburgh, the savings are about $320 a month. These savings are even more surprising when considering that homes for sale tend to be larger than the typical rental.
This trend also holds true across the U.S. The typical rent payment nationally is $2,063 a month, but the typical mortgage payment is $1,827 (assuming a 20% down payment, a 6.5% interest rate and a 30-year fixed mortgage)–a savings of $236 a month by owning rather than renting.
“This analysis shows homeownership may be more within reach than most renters think,” Zillow Home Loans Senior Economist Orphe Divounguy said. “Coming up with the down payment is still a huge barrier, but for those who can make it work, homeownership may come with lower monthly costs and the ability to build long-term wealth in the form of home equity — something you lose out on as a renter.”
Zillow noted there are additional costs for both renting and homeownership beyond monthly rent or mortgage payments that must be considered. Homeowners pay taxes, insurance and utilities and should be prepared for ongoing maintenance costs. Renters also typically need insurance and will often need to pay extra for parking, pets and utilities.
“There are pros and cons to both buying and renting, but generally, the longer you plan to stay in your house, the more financial sense it makes to buy,” the report said. “Mortgage payments can decrease over time by paying off private mortgage insurance or refinancing your loan at a lower rate, whereas rent payments have the potential to increase at each lease renewal. Beyond that, mortgage payments build homeowners’ equity in their house — increasing their financial stake in their home as time passes.”
