Owning a home is often considered the American dream — and it's an expensive one. Homeowners in all 50 states and Washington, D.C., pay from 33% to 93% more for housing each month than do renters living in the same state, according to a new NerdWallet analysis.
But many homeowners reap benefits that you can't get from renting, such as financial security and stability, tax deductions and a vehicle for retirement savings. With each mortgage payment, you get closer to fully owning the home. The equity you build can be leveraged for loans like cash-out refinances, home equity loans and lines of credit that can be used to improve the home and boost its value or be used in financial emergencies.
While renting can't offer those long-term financial benefits, it's cheaper to rent on a month-to-month basis, the analysis found. If you're wondering how to save money for a down payment, renting can help you build that nest egg — but in extremely expensive or competitive markets, renting might be better for the long haul. If you're considering buying, before entering the market, use a mortgage calculator to estimate the costs and compare mortgage rates to find the best deal.
To determine the monthly homeownership premium — the additional cost of owning instead of renting, expressed as a percentage — NerdWallet compared 2015 American Community Survey data from the U.S. Census Bureau for the median gross rent and median homeownership cost in each state and Washington, D.C. Median gross rent includes the costs of monthly rent and utilities for all kinds of rental properties, and median homeownership cost includes monthly mortgage payments, real estate taxes, insurance and utilities.
This comparison doesn't include the down payment required to buy a home, which is traditionally 20% of the home price for conventional mortgages, but is lower for FHA or VA loans.
Hover over a state to see the median monthly homeownership premium — the additional cost of owning instead of renting, expressed as a percentage.
Emily Starbuck Crone is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org. Twitter: @emstarbuck. Dan Tonkovich is a data analyst at NerdWallet. Email: email@example.com.
NerdWallet analyzed one year of data from the U.S. Census Bureau's American Community Survey from 2015, the most-recent data available. To determine the homeownership premium, we used the median gross rent for all rental properties and the median homeownership cost for all states and Washington, D.C., to determine a percentage that shows the added cost, as a premium, that people pay each month to own a home.
The article How Much More It Costs to Own vs. Rent in Your State originally appeared on NerdWallet.