Homeownership is a goal for many, but it isn’t the ideal choice for everyone. Currently, renters make up 37 percent of households in the U.S., translating to over 43.7 million homes—an increase of more than 6.9 million since 2005. Both renting and owning come with their own advantages and drawbacks. Before you schedule a meeting with a real estate agent, it’s important to weigh the costs associated with homeownership that renters typically avoid. These factors might lead you to reconsider whether buying a home is the right move for you.
Property Taxes
Owning a home comes with the ongoing responsibility of paying property taxes. On average, U.S. homeowners spend about $2,110 annually on property taxes, making it a significant and consistent expense in your budget. It’s crucial to account for this cost early on to avoid unexpected surprises later. Property tax rates can differ significantly between states, so using a mortgage calculator to estimate these costs in your area can help you better plan your finances.
Homeowners Insurance
Homeowners insurance safeguards you against losses and damage to your property from events like fires, storms, or burglaries. It also covers legal expenses if someone is injured on your property. Typically, homeowners insurance is a requirement for securing a home loan. If you’re buying a condo, you’ll need a separate condo insurance policy, as it’s different from standard homeowners insurance.
Maintenance & Repairs
As a homeowner, you’ll need to handle all those small repairs that you previously relied on your landlord for. Noticing a tear in your window screen? Dealing with a running toilet? Replacing burned-out light bulbs in the hallway? These are all tasks you’ll be responsible for. Maintenance costs can add an extra $3,021 to the average annual expenses for U.S. homeowners, and this amount tends to increase as your home ages. Repairs can also be significant. Conventional water heaters last about a decade and replacing one can cost between $500 and $1,500. Air conditioning units typically last around 15 years, and asphalt shingle roofs generally need replacing after 20 years.
HOA Fees
A seemingly affordable monthly mortgage payment might not tell the whole story if you overlook homeowners association (HOA) fees. HOA fees will vary based on what is included. These fees typically cover amenities such as a fitness center, neighborhood landscaping, community pool, and other shared spaces. As a renter, you usually benefit from these amenities without extra costs, but as a homeowner, you’ll be responsible for these fees in addition to your mortgage payment.
Utilities
When renting, your landlord often covers some expenses, but as a homeowner, you’re responsible for all utility bills — including water, electricity, gas, internet, and cable. Utility costs can vary significantly based on factors like your home’s size and your local climate, but the average U.S. homeowner spends about $2,953 annually on utilities. Ultimately, renting could be more cost-effective depending on your lifestyle, location, and financial situation. By carefully calculating these expenses, you’ll be better equipped to make the best decision for your needs.
As you begin your home search, there are key terms to be familiar with in the Real Estate World. To learn more, read 10 Real Estate Terms to Know