For many people, buying a home is part of the American dream. But is it always the best path? If you’re tired of “throwing money away” on rent and considering buying, it’s important to take the time to ensure it makes sense for your situation — both financially and emotionally.
Ramit Sethi, the author of the New York Times bestseller I Will Teach You to Be Rich and host of a popular podcast by the same name, recently spoke with a couple who bought a home in Arizona after their rent increased, and they discovered it may have been the smartest financial move.
What started as an effort to escape rising housing costs quickly turned into a financial strain, one that, Sethi argues, could have been avoided with a more thoughtful approach. The couple now finds themselves paying more for a mortgage than they would have if they’d stayed in their rental. And they’re far from alone.
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Is it always worth it to buy a house versus renting?
In the “We bought a house…to avoid a rent hike. Big mistake” episode of the Money for Couples podcast, a couple explains that they purchased a home in Arizona in 2022 because their rent had been rising.
They had started out paying $1,300, which increased to $1,800. Their landlord then wanted to raise it again to around $2,400, so they decided to buy instead of putting their money “toward nothing.”
Today, their monthly housing costs, including mortgage and HOA fees, total around $2,700 — $300 higher than if they’d stayed in the rental. And that’s without factoring in long-term maintenance costs, which in a place such as Arizona can be steep if the air conditioning goes out.
“You were afraid of a rent increase, but now you’re paying more,” Sethi tells them bluntly. “Rent is not throwing money away. It’s a financial and lifestyle decision,” he explains. “You can throw money away on interest, too.”
According to Sethi, the notion that renting is “throwing away money” is one of the biggest financial myths in America. He compares it to buying a car or subscribing to a service — rent is simply paying for a place to live.
Sethi’s larger point is that renting isn’t failure, it’s a valid choice for many people, especially when home prices are high and inventory is tight. In fact, according to USA Today, the monthly cost of renting across all 50 of the largest metro statistical areas was 37% cheaper than buying a typical home in 2024.
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Here’s what you should know before buying a home
Buying a home may be a goal for many Americans, but renting comes with a lot of benefits, including flexibility, no responsibility for major repairs and often lower upfront costs. For people who move frequently, aren’t ready to commit to one area, or simply don’t have the funds for a down payment, renting can be the smarter financial move.
That said, homeownership can still be the right decision, if the numbers work out. Here’s what to do before making the leap:
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Calculate the true cost of ownership: Include not just the mortgage payments but also taxes, HOA fees, and saving at least 1% of the home’s value for maintenance. (Consider saving 3% if you have an older home)
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Compare the actual cost to renting: Compare the true cost of buying to renting over one full year. You may find that renting is a more affordable option. Use a rent-vs-buy calculator to see which option is really more affordable in your area.
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Factor in opportunity costs: If you have the funds for a down payment, think about what that money could be used for instead. Could you pay off debt, start a business, or invest? What losses will you experience by using it to buy a home? This may change your math.
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Don’t forget closing costs: The upfront fees you’ll pay when buying a home, for things like credit checks and title searches, average around $7,000, according to BankRate. Make sure to consider these costs when deciding between renting and owning.
Many Americans are grappling with rising rents and the pressure to buy a home as a way to “get ahead.” But as this couple’s story shows, buying out of fear or emotion can backfire. A mortgage doesn’t automatically mean stability or smart financial planning, especially if the total cost of ownership ends up being higher than rent.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.