Bankrate.com, by Bernadette Joy
“Rentals are throwing away money.” Has anyone ever told you this? Well, I’m saying here: That’s bad financial advice.
My husband and I have owned four different homes in three cities since 2010. If I wanted to, I could buy a house with cash today. However, for the past three years I have chosen to rent instead. And my net worth grew at leaps and boundaries for that choice, not for that choice.
This is always a hot topic. In particular, renting challenges traditional rhetoric that homeownership is the ultimate path to wealth. And I get it – owning a home is part of the “American Dream.” But if that doesn’t lead to financial freedom, homeownership could be a nightmare.
If done intentionally, let us show you how you can actually make you richer.
Rentals avoid the hidden costs of homeownership
When you own a home, you don’t just pay a mortgage – you are also responsible for home maintenance, property taxes and insurance. In fact, the hidden costs of Bankrate’s 2025 homeownership research found that the average annual cost of owning and maintaining a single-family home is over $21,000.
This will incur some of these costs when renting. Unless your rental unit includes utility and internet, you’ll probably have to pay from your pocket. You probably pay less electricity than a large, detached house, but for discussion, let’s take these average costs at face value.
If you omit the costs you still have when renting, your homeownership averages $15,391. This is almost $1,300 that can be released each month.
Although no states require renter insurance, most landlords have regulations in rental agreements that require this type of coverage. Although it is usually cheaper than homeowner insurance, renter insurance is another cost to consider calculations.
And don’t forget about mortgage interest
My clients are constantly shocked when they review their 30-year mortgage amortization table. At the beginning of your mortgage, the majority of your monthly payments are headed towards interest. You’re not actually building equity in the first few years of your mortgage – you’re paying mostly interest.
Let’s say you take out a $420,000 mortgage. He qualified for a mortgage rate of 6.75% over his 30-year term. Monthly payment is $2,724.
Of your first mortgage payments, only $362 pays your principal balance – a whopping $2,363 heads towards interest. Your balance changes over time, and by the end of your 30-year term, the majority of your payments will go towards the principal. But how likely is it that you will be able to see your mortgage to a bitter end without selling or refinancing (and launching the watch again)?
I helped five clients make the decision to sell their homes in 2025, but no one has lived there for over a decade. A lot of their money is interested and they don’t get much fairness in return.
After five years of faithfully paying $2,724 a month, you only make around $25,000 in home equity. Meanwhile, your mortgage servicer will earn almost $138,000 from the interest on your loan. A five-year mortgage payment costs $163,440. In return, he won $25,000 in stock. It doesn’t seem to be worth it.
Instead of paying $15,000 a year with a huge amount of homeownership costs and mortgage interest, you pay rent. Of course, I won’t make a profit from that money, but more cash will stay in my pocket – I can spend on investments. Use a mortgage calculator to look at the amortization table and calculate your numbers.
You can free up capital to lend wealth
“Estate is always grateful for its value.” This is a myth. Ask anyone who sold their homes during the 2008 financial crisis. My husband and I paid $10,000 out of our pocket to sell his house at the time.
Yes, real estate can be appreciated, but it is also very market dependent and location dependent. Over the past three years, the investment and financial education business I have made to the stock market have significantly outperformed returns at home in the local market, resulting in much less headaches.
Unfortunately, some of my clients have bought their homes at the height of the pandemic boom and are now seeing their home value falling from their peak.
In today’s economy, renting is becoming an increasingly affordable option.
These figures show you can save more than $9,000 a year by renting. That money could be even more useful to many Americans, and if they reassign that money to wealth-building assets.
After selling my house and returning to rent, I took the revenue from the sales and invested in the growth of my business. Since then my husband and I have been able to contribute to our maximum amount of 401(k) and individual retirement accounts (IRAs) and pursue early retirement.
When I moved from homeowner to rent, I used the revenue from my home sales and invested in accounts with low risk interest, such as high-yield savings accounts, money market accounts, and certificates of deposits (CDS). This passive income covers my rent and other living expenses.
I have more money working for me as a tenant than I did as a homeowner.
Rentals can provide new social networks and income opportunities
Some of my older coaching clients tend to mistakenly believe that rentals amount to a decline in quality of life. I was happy to dispel the myth when they commented on the dance, improvisation and travel that my rental lifestyle houses.
I live in a walkable, one-bedroom rental in a neighborhood filled with restaurants, music, theatres and fitness. Postcovid apartments often feature collaborative work spaces, gyms and even social events where you can meet people from all walks of life. I felt more isolated in the suburbs where I used to live.
I also managed to find more side jobs than I had when I lived in the suburbs, including teaching financial literacy classes and walking dogs and babysitting for building neighbors.
The combination of downsizing and rental allowed us to quickly pick up and move to take advantage of potential business or employment opportunities in other cities. I can afford to buy a global trip with my business partners using the money I’ve previously spent on lawn care and home DIY projects. I have spent more time expanding my social and professional networks and doing things that bring joy.
Why Rentals are Strategic
According to Bankrate’s 2025 emergency savings report, there is enough emergency savings to cover the three-month expenses, with about a quarter having no emergency savings at all. If your money is not being taken due to a rainy day, it is especially important to keep strict control of your monthly expenses. Predictable monthly payments are important.
Fixed-rate mortgages may appear stable, but property taxes can rise at any time. Insurance premiums can go up and maintenance is always more expensive than you think. Avoiding surprising repairs to your water heater, HVAC system, or rooftops can reduce the fear of not saving enough cash, especially if those repairs are thousands of dollars.
Your next step
What costs will actually help me build the life I want? Do I want a house in the suburbs because I believe it is expected of me? Should I spend more of my money elsewhere? If you already own a home, have you considered the real-world costs associated with mortgages, maintenance, and other home costs? How does my homeowner’s cost compared to rentals in my area?
Final Thought: Owning a home is great – if it fits your financial plan
As a first generation American, I felt the weight of expecting my family to survive the American dreams. But I am proof that rentals have not stepped back. Also, you should not feel embarrassed about choosing to rent.
It was a strategic move that enriched me financially, mentally and emotionally.
Just like thinking about gym memberships or software subscriptions, think about rentals. This is the monthly cost that may support the lifestyle you want. It’s not about “throwing away money.” It buys peace of mind, freedom of movement, and time to grow wealth in other ways.
For me, real wealth is not found in area. It lies in the daily opportunity to move freely and live freely, depending on what matches my own version of the American Dream.
©2025 Bankrate.com. Distributed by Tribune Content Agency, LLC.
Original issue: July 9, 2025, 2:07pm EDT
