Historical savings from mortgaging (and maintaining) vs. renting home in America

There’s a common belief that Americans would be in a significantly better financial position if only they could afford to buy a home.

But has buying (particularly with a mortgage) and maintaining a home historically been that much cheaper than renting? If so, how much have homeowners saved on average?

To answer these questions, Creditnews Research compared the total costs of renting an average home since 2000 to the expenses of mortgaging a median-priced home in 2000 and maintaining it until 2024.

What we found puts the debate over America’s homeownership affordability in a whole new perspective.

"The decision to buy versus rent isn’t as clear-cut as many make it out to be. On one hand, the costs of mortgaging and maintaining a home far exceed the accumulated equity. On the other hand, factoring in rent costs, mortgaging a home could save you hundreds of thousands of dollars in the long run."

Sam Bourgi

Senior Analyst at Creditnews Research

Rent costs (2000-2024)

Over the past two decades, rent has become a lot more expensive in America—far outpacing inflation and wage growth.

Analyzing the median asking rent for unfurnished apartments across the U.S., Creditnews Research found that the rent has more than doubled from $841 to $1,837 since 2000.

In all, tenants spent a cumulative $366,480 to rent a median-priced rental home between 2000 and 2023.

The one silver lining is that the market appears to have cooled from its peak in 2022 when the average annual rental expenditure reached $22,488.

Homeownership costs and accumulated equity (2000-2024)

Despite the significant jump in rent prices since 2000, financing and maintaining an average home have been much more expensive over the same period.

To determine the true cost of homeownership, Creditnews Research analyzed six components of homeownership expenditures—including mortgage costs, homeowners’ insurance, mortgage insurance, property tax, and maintenance costs.

Based on this analysis, the total annual cost of homeownership in 2000 was $16,383—62% higher than renting in the same year.

By 2023, annual homeownership costs (for the same house) reached $23,477, a 43% increase from 2000 and just 7% higher than rent expenses.

In other words, it was only by year 23 of homeownership that homeowners' expenses leveled out with rent expenditures.

Combined, the total cost of owning a home between 2000 and 2023 amounted to $454,092, which is 24% higher than renting a median-priced home over the same period.

Here’s how homeownership costs break down:

As the breakdown illustrates, homeowners often overlook how much they spend on interest as opposed to paying down a home.

Between 2000 and 2023, homeowners would have paid a whopping $140,141 in interest payments—far exceeding the total principal payment of $103,104 over that period.

The only caveat is that, unlike rent, mortgage costs drop over time as owners pay less interest and accumulate more equity with each mortgage payment.

The good news is that homeowners have accumulated a lot of equity over the years as they paid down principal, and their homes appreciated in value.

Creditnews Research estimated home equity by subtracting the remaining mortgage debt balance from the median home value for all homes sold in the U.S. for a given year.

By our estimates, homeowners accumulated an average of $376,722 in home equity between 2000 and 2023, thanks to a 159% jump in home prices.

Final verdict

There's a common belief that renting a home instead of mortgaging one is like throwing money away. But the economics of renting versus buying isn’t as clear-cut.

For starters, homeowners who take out a mortgage are expected to allocate nearly a third of their housing costs on interest alone. Property tax accounts for another 15.8%, and combined insurance costs represent 9.3% of total expenditures.

Let’s not forget maintenance costs, which account for a whopping average of 21.3% of homeownership costs.

In all, only less than one-fourth of the amount homeowners spend to own a home goes toward paying down the principal balance.

When adding up all the costs and accumulated equity, homeowners actually spent more on their homes than they got back—with the accumulated equity falling $77,370 short of all the incurred expenses between 2000 and 2023.

But while mortgaging your home isn't a good investment in and of itself, factoring in rent costs, homeownership does pay off—even if it's financed.

By our estimates, homeowners who mortgaged their homes instead of renting saved, on average, a whopping $289,110 in housing costs between 2000 and 2023.

Homeowner savings in perspective

$289,110 in savings over 23 years is nothing to sneeze at.

Here’s where those savings would put homeowners on America’s net worth ladder:

• $289,110 amounts to more than two-thirds of the net worth that the average American household peaks at—which is $409,900 for those aged 65-74 and includes home equity as well as retirement funds and other investments;
• This amount would also put homeowners in the 75th percentile of Americans aged 35 to 44 and the 65th percentile of Americans aged 45-54 by net worth;
• The savings of $289,100 are also 2.5 times higher than the median American retirement portfolio.