I am constantly reading articles about saving money. I have seen many, many individuals talk about renting as just throwing away money that could go towards paying for the renter’s own house. As a landlord, I might be slightly biased about renting, however, there are some significant hidden costs to home ownership that many people forget about.
Before you get excited by commercials or advertisements that say that you can own a home for the same amount as the rent that you pay, remember these additional costs of home ownership.
If you live in an apartment that includes utilities, you might be shocked by just the utility costs. This includes not just your electric and water bill but might include a gas, sewer garbage and/or recycling bills as well. This all depends on where you live, of course.
- Homeowner’s Insurance
This is one you certainly never pay as a renter. Renter’s insurance is incredibly cheap, but homeowner’s insurance can be ten times the cost. If you think that you can get away with not paying for homeowner’s insurance, beware that your mortgage company most likely requires you to keep one. If you don’t have a policy, they may purchase one on your behalf and pass the costs on to you.
A house might mean additional furnishing, especially if you move from a small apartment into a house. There is a huge temptation to purchase all new furnishings immediately, but, waiting until you’ve adjusted to paying for the your new home is probably a better idea.
- Maintenance & Repairs
When things break at your apartment, you pick up the phone and tell your property manager or landlord so that they can handle the problem. Guess what? You’re the landlord now. if anything breaks, and they will, you must either pay to fix it, or break out your handyman skills. You’re also now responsible for the yard maintenance, gutter cleaning, and snow removal. Cheap people like me get out there and push the lawn mower (also another expense) to save money.
- Property Tax
Depending on where you live, the property taxes can be the equivalent of a few months’ mortgage payment. Just when you get used to paying the property tax, they’ll increase it. The property tax on one of my rental homes increased by 25% in just one year. Typically, things like that won’t happen unless you have crooked politicians in office who are lining their pockets with your hard-earned cash, but, be aware that increases are normal.
- Homeowner’s Association/Condo/Co-op Fees
This is why I will not buy property in a sub-development, condo, or co-op. These fees can be hundreds of dollars each month, and I guarantee that they never decrease. You might be able to pay your mortgage, but if these fees increase significantly, you can lose your home because you have not paid these fees.
The next time that you see a commercial saying that you can own a home for the same amount that you are currently paying on rent, think again. These hidden costs of home ownership can derail your plans of owning your own home.
The fees listed above are just some of the fees that you might incur. I did not discuss possible private mortgage insurance if your down payment is below 20% of the home’s value and supplemental insurance such as flood that might be necessary depending on where you live.
Have you purchased a home and found it to be more expensive than you initially thought? Share in the comments.