Are you considering making the transition from renting to owning a home? Most people know that there are monthly expenses associated with owning a home, but too often, these homeowners-only costs are overlooked in the excitement of finally getting into your dream house. Don’t find yourself in a financial pinch when it comes time to pay those unexpected homeownership bills! Read on as we explore six expenses commonly incurred by homeowners that renters never have to worry about.
Property taxes are an annual expense that all homeowners must pay. These taxes help fund local schools, public safety services, and infrastructure improvements in your community. Property taxes vary widely depending on the area you live in; they are typically higher in more populous cities or suburbs. On the other hand, renters do not have to pay property tax directly since their landlord is responsible for it.
Most people need to take out a loan when they buy a house. When you take out a loan on your home purchase, you will most likely be required to make monthly payments of principal and interest. The interest rate on the loan will determine how much money you will have to pay each month, so it pays to shop around for the best rates before taking out a loan. On the flip side, renters don’t have to worry about making these monthly payments since their landlords bear this burden instead.
Home insurance is another expense that comes with being a homeowner that renters don’t have to worry about paying directly. Homeowners insurance covers damage from natural disasters like tornadoes or hurricanes as well as theft or vandalism of your property due to certain perils such as fire or smoke damage. It also includes liability coverage for any accidents that might happen on your premises. Renters may not be required by law to carry their own insurance policy, but most landlords require tenants to carry renter’s insurance policies as part of their lease agreement in order to protect their investment in case of an accident or disaster occurring within the rental unit itself.
Maintenance & Repairs
As a homeowner, you are responsible for all repairs and maintenance needed inside and outside your home—from fixing broken windows and plumbing issues to mowing the lawn and painting walls when necessary—all of which can add up quickly over time if left unchecked! Renters do not incur these costs since their landlord is usually responsible for taking care of these tasks unless otherwise specified in the lease agreement (e.g., requiring tenants to perform regular yard maintenance).
Real Estate & Legal Fees
Real estate fees include closing costs (such as title search fees), transfer taxes (like stamp duty), and legal fees associated with purchasing real estate—all of which can add up quickly! Although some lenders may offer special deals where they cover some/all of these costs upfront (often included in what they call an “origination fee”), buyers should still expect some level of expense associated with purchasing real estate, even after securing financing from lenders. Renters do not incur any of these fees since they are usually paid by either the seller or lender at closing time when buying homes outright with cash via traditional contracts between buyers and sellers/lenders and borrowers, respectively.
In addition to paying property tax and mortgage interest each year, many homeowners also have additional costs associated with belonging to a homeowner association (HOA), such as dues for the upkeep and maintenance of common areas and amenities shared among neighbors. These dues can range anywhere from $50–$200+ per month, depending on what kind of facilities are available within the neighborhood or community. Fortunately, though, renters do not usually need to worry about paying HOA fees since they typically only apply when one owns a property outright without having any form of leasing arrangement between them and their landlord(s).
Renting or Owning—Which is Right for You?
As a renter, you save money in the short term by not having to pay for some of these expenses. But as a homeowner, you eventually build up equity that can offer financial stability and security later on down the road—not to mention the satisfaction of knowing your home is entirely yours. Weighing all these factors will help you decide whether buying or renting makes more sense for you in the long run. And if you’re leaning toward homeownership but worried about affording it, contact me to learn about all your options.