Buying a House While Renting an Apartment

A couple that is being spoken to inside a house by a realtor.

Buying a House While Renting an Apartment

Most people would be better off as homeowners than as renters. Some financial advisors suggest renting and investing the difference instead of buying a home, but that advice doesn’t always reflect real life. The truth is, home ownership remains one of the most effective ways for average people to build wealth over time.

If you’re renting now but want to own a home, you’re not alone. Many renters in 2025 are looking for ways to break free from rising rents and start building home equity of their own. But making the leap from tenant to homeowner requires planning, preparation, and good timing.

In this guide, we’ll show you how to transition from renting an apartment to owning a home — including how to budget for mortgage payments, understand the monthly costs, and work around lease terms.

Buying vs Renting a House: Understanding the Key Differences

To begin, let’s look at the key differences between renting vs buying a house:

  • Monthly payments: Renters pay monthly payments that don’t build wealth. Homeowners make a mortgage payment that reduces their loan and increases home equity.
  • Upfront costs: Renters pay a security deposit, sometimes last month’s rent, and move-in fees. Buyers face upfront costs like a down payment, closing costs, and a home inspection.
  • Recurring costs: Renters may pay renters insurance, utilities, and internet. Homeowners pay for homeowners insurance, property taxes, utilities, and sometimes HOA fees.
  • Control and stability: Renters are subject to rent rate increases and landlord decisions. Homeowners have more control over their property and housing costs (especially with a fixed rate mortgage).
  • Financial growth: Renters don’t gain ownership, so there’s no return on rent. Homeowners gain from home value increases and long term capital gains when they sell.

Renting isn’t wrong, but it’s not usually a long-term wealth-building strategy. As soon as your financial situation allows, switching to owning a home can give you more control and a better future.

The Cons of Renting

Renting may offer more flexibility, but there are trade-offs. Here are the biggest cons of renting:

  • No equity: Your payments don’t build anything for you.
  • Rent increases: Annual rent increases can strain your budget.
  • Lack of stability: Your lease could end or your building could be sold.
  • No tax benefits: Tax benefits homeowners receive aren’t available to renters.
  • Limited freedom: You may not be able to paint, upgrade, or renovate.

These downsides become more obvious the longer you rent, especially if rents continue to rise faster than your income.

Mortgage Payments: What’s Included

One of the biggest transitions from renting to owning is understanding your new mortgage payments. A monthly mortgage payment includes more than just repaying the loan:

  • Principal – the part of the payment that reduces your loan balance.
  • Mortgage interest – the cost of borrowing money.
  • Property taxes – usually divided monthly and added to your loan payment.
  • Homeowners insurance – required by your lender.
  • Private mortgage insurance (PMI) – if your down payment is less than 20%, most lenders require you to pay PMI each month.

If you choose a fixed rate mortgage, these costs stay stable, making it easier to plan consistent payments over time.

Monthly Payments: Comparing Rent to Ownership

When comparing monthly payments, you need to look beyond just rent vs. mortgage. A renter’s budget includes:

  • Rent
  • Renters insurance
  • Utilities
  • Internet and phone

A homeowner’s monthly housing costs may include:

  • Mortgage (principal + interest)
  • Mortgage insurance
  • Homeowners insurance
  • Property taxes
  • HOA fees
  • Utilities

In some areas, monthly mortgage payments may actually be lower than monthly rent payments — especially in 2025, where rent costs have outpaced income growth in many cities. It’s also important to consider what each payment buys: rent gives you a place to live; a mortgage buys you ownership and equity.

Other Costs to Prepare For

One area first-time buyers overlook is the full list of other costs that come with a home purchase. These include:

  • Closing costs: Usually 2%–5% of the home’s purchase price.
  • Home inspection: A fee that helps avoid hidden issues.
  • Moving costs: Trucks, boxes, movers, and setup fees.
  • Utility deposits: Sometimes required to start service.
  • Earnest money: A deposit you pay when making an offer.
  • Maintenance: Repairs, replacements, or upgrades.

While some of these are one-time fees, others are recurring costs. That’s why it’s so important to budget before you buy.

A couple holding a model house in the house the moved into while renting an apartment.

Maintenance Costs: What to Expect as a Homeowner

As a renter, if the plumbing breaks or the fridge dies, your landlord handles it. As a homeowner, those costs are yours.

Experts recommend setting aside 1%–4% of your home’s value each year for:

  • Roofing repairs
  • Appliance replacement
  • Plumbing or HVAC issues
  • Lawn care or snow removal
  • Emergency repairs

You don’t need to spend that every year, but the opportunity cost of not saving is high — an unexpected $4,000 repair could put you in debt without an emergency fund.

Building Equity: Why It’s So Valuable

Every time you make a mortgage payment, part of it goes toward paying off your loan. This increases your ownership interest in the home — also known as home equity.

Unlike rent, which disappears forever, equity is something you keep. You can borrow against it, sell the home for profit, or pass the property on to family. Equity can also grow faster if home prices in your area rise. That’s why building equity is one of the biggest financial advantages of owning a home.

Get Your Credit and Debt in Order

Everyone who is planning to get a mortgage should take some time to review his or her credit and make sure it’s ready. It’s well known that 1 in 4 credit reports contain errors that can affect your creditworthiness, so you should pull and review your credit even if you’ve never missed a debt payment.

You can get a free credit report from each of the three credit bureaus from www.annualcreditreport.com, and you can purchase your credit scores from www.myFICO.com.

Make sure your credit reports are accurate, up-to-date, and reflect positively on you. A certified credit report reviewer can help, or you can get our free Consumer Guide To Good Credit (from our downloads page) to help you with those steps.

If there are negatives you can’t remove, you can add a 100-word statement explaining why the negative item is on your credit report. This statement won’t help your credit score, but a human reviewing your credit report will take it into account, and it can help smooth the way for you with certain lenders. Learn how to add this statement from our Consumer Guide at the download link above.

Learn more: Adding a 100-Word Statement to Your Credit Report

If you have past due debts, pay them off or get caught up. It’s important to do this in advance of applying for a mortgage (the further in advance, the better) to give yourself time for your credit to get better after getting caught up.  But if you have past due debts that are older than the statute of limitations, be very careful with making a payment as that can “reset the clock,” talk to a certified credit coach about your options.

How to Save toward a Home Purchase While Renting

Saving for a home while still renting takes discipline — but it’s possible. Here are smart ways to build your savings:

  • Create a budget: Track your income and expenses closely.
  • Automate savings: Set up transfers from each paycheck to a separate savings account.
  • Cut back: Reduce streaming services, subscriptions, or eating out.
  • Increase income: Use gig work or a side hustle to boost savings.
  • Use windfalls wisely: Tax refunds or bonuses should go to your down payment or closing costs.

Some buyers also use a payment assistance program to help with upfront costs or combine savings with gift funds from family.

Renting with Intent to Buy: Planning Ahead

If you’re not ready to buy yet, you can still rent strategically with a plan to become a homeowner. Here’s how:

  • Go month-to-month: Avoid long leases that could limit your flexibility.
  • Downsize: Rent a smaller or cheaper apartment and bank the savings.
  • Avoid major new debts: Don’t take on big car loans or credit cards.
  • Practice homeownership: Set aside money each month as if you had to cover property taxes, maintenance, and homeowners insurance.

This mindset helps you prepare for recurring costs while giving you time to work on your financial situation.

Rent-to-Own: Is It Worth It?

Some renters consider rent-to-own options. These agreements allow you to rent a home with the option to buy later, often for a set price. A portion of your rent payments goes toward the purchase price.

Rent-to-own can be helpful if:

  • You need time to improve your credit
  • You don’t have a full down payment saved
  • You want to “test out” a property

But these deals can be risky. You’re responsible for maintenance costs and may lose your option fee if you back out. Always have a real estate attorney review a rent-to-own contract before signing.

Talking to Your Landlord: How to Exit Gracefully

Before you move forward with a house purchase, take time to review your lease. Talk to your landlord and ask:

  • When does my lease end?
  • Is there a penalty for early termination?
  • Are there any home-buying clauses in the lease?

Some leases allow you to leave early without penalty if you’re buying a home and provide proof of purchase. If your landlord needs time to find a new tenant, giving early notice can help you avoid extra monthly rent or early termination fees.

Always get agreements in writing. And remember — unpaid rent or broken leases can hurt your credit just as you’re trying to qualify for a home loan.

Final Walk Through and Closing

Before you close on your new home, you’ll do a final walk through — a chance to check that everything is in the condition promised and that agreed repairs are complete.

Then, on closing day, you’ll:

  • Sign the mortgage agreement
  • Pay your closing costs
  • Submit your down payment
  • Receive your keys

At that moment, the property becomes your primary residence — and you’re officially a homeowner.

After You Buy: Life as a Homeowner

Your journey doesn’t end at closing. Now you’ll manage:

  • Monthly mortgage payments
  • Homeowners insurance
  • Property taxes
  • HOA fees (if applicable)
  • Maintenance costs
  • Home improvements

Keep saving, track your expenses, and monitor your home value. You can also explore refinancing later or making extra payments to reduce your interest.

As a homeowner, you will feel the impact of renting vs buying; you will pay property taxes that you didn't realize you were paying when renting a home. Your utility bills might be higher, there may be homeowners association dues, higher home insurance, home repairs, and other potential costs.

Don't let these new costs scare you. The total cost of homeownership might be a little higher than renting, but in some markets it's actually lower. Remember when you own your own home, you can save on taxes with the mortgage interest deduction or other itemized deductions.

Emotional Side of Owning a Home

Transitioning from renting to owning isn’t just financial — it’s emotional too. You’re responsible for everything, but you also gain:

  • Privacy
  • Stability
  • Pride
  • Ownership
  • Greater personal choice

It’s normal to feel anxious or uncertain. Lean on your support system and celebrate the small milestones: saving a lump sum, getting preapproved, or finishing a budget. You’ve taken a big step toward long-term stability.

Final Thoughts: Your Path to Home Ownership

Whether you’re just starting to save or ready to buy now, the transition from renter to homeowner is possible. With careful planning and realistic expectations, you can:

  • Save for upfront costs
  • Understand the application process
  • Budget for monthly payments
  • Choose the right home loan
  • Start building equity
  • Enjoy the tax benefits that homeowners receive

Owning your home can change your financial future.

Need help getting started? Talk to a HUD-certified housing counselor — it’s free and designed to guide you every step of the way.

Jeff Michael
Article written by
Jeff Michael is the author of More Than Money, a debtor education guide for pre-bankruptcy debtor education, and Repair Your Credit and Knock Out Your Debt from McGraw-Hill books. He was a contributor to Tips from The Top: Targeted Advice from America’s Top Money Minds. He lives in Overland Park, Kansas.
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