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Here’s how much of your landlord’s mortgage you’re paying as a renter

Here’s how much of your landlord’s mortgage you’re paying as a renter

Rental prices are seemingly increasing every day, and in many ways, landlords and property owners can relate to this growing expense, as home prices are going through similar trends in major cities across the United States.

At Monypenny, we support and work closely with real estate businesses on an international scale, so we know a thing or two about mortgages and why people choose to rent their properties to cover them. In fact, we’re sure many renters have asked themselves: “Just how much of my landlord’s mortgage am I paying with this hefty rent check of mine?”

We found this question fascinating, so we decided to do a bit of research on it. The results are pretty shocking. Read on to discover what we found.

Methodology

Using data from Zillow, we collected the monthly median rent price of a single-family residence in the 50 largest cities in the United States over the last five years (July 2014 – July 2019). Then, we calculated the seasonally adjusted median monthly mortgage payment by collecting the median sale price of homes within the same cities and time period. Some major U.S. cities did not have data available. We collected from the top 50 cities in terms of population that had available Zillow data.

The mortgage terms we used are generally agreed to be average in the United States: 30 years, 4% rate, and down payment of 6% of the sale price. We used these terms to calculate the monthly mortgage payment in each city. Then, we compared the two values to determine how much of a tenant’s rent payment can be expected to go to their landlords’ mortgage payment on average.

Cities where renters pay the most of their landlord’s mortgage map

First, we determined which cities are home to the renters who pay the highest percentage of their landlord’s mortgage. Can you believe these numbers? We sure couldn’t.

In 28 major cities in the United States, tenants pay over 150% of their landlord’s monthly mortgage payment every month. The highest ratio is in Miami, where renters pay a whopping 304.1% of their landlord’s mortgage payment.

We see this pattern in other major U.S. cities where the rental market is especially competitive: New York (276.18%), Riverside, CA (230.85%), Boston (229.56%), and San Diego (220.74%).

Of course, landlords need to turn some sort of profit, but it really makes you think about how much demand can jack up the price of rent – and how much value there is in investing in real estate in growing markets.

Cities where renters pay the least of their landlord’s mortgage map

Of course, one benefit to living in a smaller U.S. city is a (usually) less competitive rental market, and as a result, cheaper rent and mortgages all around.

Take New Orleans for example. It is significantly cheaper to rent in this city than to own a home, as rent is less than half of a monthly mortgage payment. It sounds like a great bang for your buck!

We were surprised to learn that in only 7 major U.S. cities, it is cheaper to rent than to own a home. In cities like Richmond, VA, and Kansas City, MO, the average renter pays less than 100% of their landlord’s monthly mortgage payment, meaning that, unless the mortgage is already paid off, landlords are losing money.

For the most part though, it seems that renters are getting the short end of the stick, and landlords are paying off their mortgages quickly. Interested in investing in real estate or becoming a real estate agent yourself? Be sure to check out our services, and discover what our comprehensive phone answering service and live chat solutions will do for your business.

To view the data visualized another way, check out the below bar chart that compares the median rent price to the median monthly mortgage payment in each city.

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