Is Homeownership More Expensive Than Renting?

03 Mar

If you are currently renting an apartment or home but are thinking about buying, you could be in for a surprise when it comes to expenses. Owning a home comes with a variety of expenses that most renters don’t have to cover. 

Everything from property taxes to maintenance and insurance will push up your monthly expenses when you become a homeowner. We thought it might be a good idea to look at a few of the additional expenses you will have to deal with when moving to homeownership.

Monthly expenses will go up

There are a number of monthly expenses that will become your responsibility to pay when you go from renter to homeowner. Even if you manage to keep your mortgage payment the same as your current rent, your monthly expenses will be headed up. Here are just a few expenses you will have to deal with as a homeowner:

Homeowners insurance: It is important to protect your home and if you have a mortgage, your lender will require that you carry homeowners insurance. While many renters carry renters’ insurance, the cost of homeowners insurance is typically much more expensive. This is due to the fact that renter’s coverage only protects your personal property, the landlord’s insurance is responsible for the damage to the building. 

Homeowners insurance has to cover the cost of repairing or rebuilding your home as well as your personal property and even other structures on your property so the premium will be much higher than renters’ insurance. Always get a quote on any home you are considering so there are no surprises after you have purchased the home. 

Property taxes: When you own a home, you have to pay property taxes, an expense that renters don’t have to deal with, that expense falls to their landlord. Always make sure you budget property taxes when looking for a house.

Maintenance: Renters can simply call their landlord when maintenance issues pop up, homeowners are not so lucky. They must deal with getting the maintenance done, as well as the cost that comes with it. According to financial guru Suze Orman in a recent Motley Fool article, homeowners should inflate their mortgage payment by 30% to accurately reflect their monthly housing costs. 

As an example, if your mortgage is $1,500 a month, you should budget $1,950 for your monthly expenses. 

Have an emergency fund

Since being a homeowner is absolutely more expensive than renting, when purchasing a home make sure your budget includes all of the new expenses you will have to cover as a homeowner. In addition, you should have an emergency fund set aside in the event an unexpected expense pops up. 

As a renter, if your furnace goes out, that cost to replace it falls to the landlord, as a homeowner, that expense is all yours. Establishing an emergency fund can be a financial lifesaver if you need to replace a major system or appliance in your home. While it varies, most experts recommend having three full months of living costs in an emergency fund. 

If you do own a home or you are looking to purchase a home, please contact us about homeowners insurance coverage, we have the best rates and coverage options available. We shop multiple carriers and review all available home insurance discounts to help you save more. Shop Home Insurance Quotes Online Now for Free!

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