Original Source Zillow

For many renters, owning a home may now be more affordable than they think, thanks to recent dips in mortgage rates. In 22 of the 50 largest U.S. metro areas, monthly mortgage payments are actually lower than rent, according to a new analysis by Zillow Home Loans. This trend is opening doors for potential homebuyers, making it a great time to consider whether buying could be the smarter financial decision.

The Cost of Owning vs. Renting

Recent drops in mortgage rates—now at their lowest since early 2023—are creating significant savings for homeowners. For those able to make a 20% down payment, the cost of a mortgage is lower than rent in major cities like New Orleans, Chicago, and Pittsburgh. For instance, in Chicago, the typical rent payment is $2,074, while the average monthly mortgage is $1,640—saving homeowners $434 every month. Nationally, the typical rent payment is $2,063, while the average mortgage payment is $1,827, resulting in a savings of $236 each month. This shift shows that for many Americans, buying a home may now be a more affordable option than continuing to rent. According to Zillow Senior Economist Orphe Divounguy, “This analysis shows homeownership may be more within reach than most renters think. 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.”

Where Can You Save the Most?

In several key metro areas, buying a home is significantly cheaper than renting. The top cities where homeownership offers the biggest savings include:

• New Orleans: Save $446 a month
• Chicago: Save $434 a month
• Pittsburgh: Save $321 a month

Even in higher-priced cities like Miami and Tampa, buyers can save over $190 per month compared to renting.

Additional Costs to Consider

While mortgage payments might be lower than rent, both homeownership and renting come with additional costs. Homeowners need to budget for property taxes, insurance, utilities, and maintenance. On the other hand, renters may face extra charges for things like parking, pets, and utilities. Still, the long-term benefits of homeownership often outweigh these costs. Over time, mortgage payments help build equity in your home, increasing your financial investment. Rent payments, by contrast, don’t provide any long-term financial return, and they have the potential to rise each year with lease renewals.

Why Now Is a Good Time to Buy

For renters thinking about making the switch to homeownership, now is an opportune time. The housing market is offering some relief, with over 25% of sellers cutting prices and inventory up by 22% compared to last year. This gives buyers more bargaining power heading into the fall. With mortgage rates falling and home prices leveling off in some areas, it’s worth checking your options. One easy way to see if homeownership is right for you is to use Zillow's new BuyAbility tool, which quickly gives potential buyers an estimate of what they can afford and their chances of getting pre-approved for a mortgage. This tool can be a game-changer for those ready to take the leap from renting to owning.

Competitive Rates at Innovative

At Innovative Mortgage Services, we help renters transition to homeownership with competitive mortgage rates and personalized service. Check out our compensation plans to learn how you can work with us and help others achieve their homeownership dreams.