How to Budget for Renting or Buying: Step-by-Step

1. Assess Your Monthly Income
   Add up all reliable income sources after taxes—this is your foundation for budgeting housing costs.
2. Set a Comfortable Housing Budget
   Aim to spend no more than 30% of your gross income on rent or mortgage, including taxes and insurance.
3. Calculate Upfront Costs
   For renting: first month’s rent, security deposit, and possibly fees. For buying: down payment, closing costs, and inspections.
4. Include Ongoing Expenses
   For renters: utilities, renter’s insurance, and internet. For owners: property taxes, maintenance, HOA, and insurance.
5. Build in Flexibility
   Leave room in your budget for unexpected repairs (homeowners) or rent hikes (renters).
6. Use a Budgeting Tool
   Track your full housing-related spending to compare actual vs. planned expenses over time.
7. Reevaluate Regularly
   Reassess your rent or mortgage readiness as your income or goals change—especially if considering a move or purchase.

What to Expect When Budgeting for Housing

• Renting may be more affordable short-term: Lower upfront costs and fewer responsibilities, but no equity.
• Buying requires more savings up front: Down payments, inspections, and closing costs can add up quickly.
• Unexpected expenses happen: Repairs, utility deposits, or HOA dues can disrupt your plan if not budgeted for.
• Cost differences vary by region: In some areas, buying may be cheaper monthly than renting—and vice versa.
• Your housing budget may change over time: Plan to reassess as your income, goals, or interest rates shift.

Pro Tips & Common Mistakes to Avoid

• Don’t stretch too far: Just because you qualify for a bigger place doesn’t mean it fits your budget or goals.
• Account for non-rent housing costs: Utilities, parking, HOA fees, or maintenance can add up fast.
• Use a rent vs. buy calculator: Comparing total costs over time can reveal which option is smarter for your situation.
• Plan for a buffer: Build in wiggle room for price increases, unexpected expenses, or moving costs.
• Budget for location, not just square footage: Proximity to work, transit, or schools can save you money elsewhere.

How Tim Chose Between Renting and Buying

Tim, a 34-year-old graphic designer, was debating whether to renew his lease or buy a small condo. He created a side-by-side budget comparing monthly rent, renter’s insurance, and utilities to a projected mortgage, HOA fees, and taxes.

Tim realized that while buying would cost slightly more each month, he could build equity—and he had enough saved for a 5% down payment. However, he also factored in maintenance costs and decided to wait one more year to boost his savings and credit score.

In the meantime, he adjusted his rental budget, started saving an additional $200/month, and tracked his total housing expenses using a budgeting app.

The result? Tim made a smart, pressure-free decision that kept him on track—financially and personally.

Frequently Asked Questions

Need Help Deciding Whether to Rent or Buy?

Our housing counselors can walk you through the true costs of renting versus buying, help you build a housing budget, and guide you toward a choice that fits your financial goals.