Home Expenses Renters Don’t Pay

by Emily Guy Birken · 18 comments

My husband and I moved from Columbus, Ohio to Lafayette, Indiana in June of last year so that he could take a new job. We bought a house and moved in quickly, barely getting the place set up before our son was born on August 31.

If we had to do it all over again, we would have moved into a rental for a year prior to taking the plunge into home ownership in our new town. While the stress of having to move twice (we had to stay in a rental for six weeks prior to taking possession of our house, anyway) is a part of the reason why we might have been better off as renters, the main problem was financial. It took our Columbus home nearly a year to sell, and by buying a home right away, we ended up paying for things that would not have been our responsibility as renters. Paying a double mortgage plus these home expenses was particularly tough even though we managed.

While there are certainly great reasons for buying a home, don’t let anyone tell you that renting is simply throwing your money away. You are spending money on your lodgings, and avoiding larger bills that you might not be able to handle. The next time your Uncle Joe starts telling you how renting is a waste of money, remind him of these expenses that homeowners pay that renters don’t:

1. Closing costs and real estate fees. You will never get the full market value of your home when you sell. In addition to having to pay for the privilege of a mortgage through closing costs and legal fees, both realtors also expect a commission. While that commission can vary, you can generally count on paying 6% total — meaning a $200,000 home sale would generate a $12,000 commission total for the realtors. Right there, you’ve saved yourself a great deal of money by renting.

2. Mortgage interest. The amount you will pay depends entirely on your interest rate and the length of your amortization. If you’re lucky enough to get a low rate, have at least a 20% down payment saved, and you only plan on having a 15-year mortgage, as we did, this cost is relatively negligible when you compare it to the benefits of owning a home. But if you’re unable to qualify for a good interest rate, don’t have much saved, and plan on paying for 30 years because you can’t refinance into a shorter loan period, that interest could really bite you. If you are hoping to buy a home eventually, it does make sense to wait until you are able to qualify for the best possible rates and have a sizable down payment in the bank. Until then, “>your money is better spent on renting.

3. Property taxes. No matter how long you live in your home, or how quickly you pay off your mortgage, you will always have to pay property taxes assessed on the value of your home. As your home’s value changes, your property tax will also change. Property taxes are an important way to pay for such local needs as schools and local government. But these taxes can be very high depending on where you live. Let your landlord pay the property taxes while you are saving your dollars.

4. Maintenance. One of the things I miss most about rental living is care-free maintenance. Back in my rental days, I could give a quick ring to the building manager if there was a problem, and have someone deal with any issue within less than 24 hours. Now, when the water heater implodes, or the drains stop draining, or the refrigerator decides it would prefer to keep food at room temperature, my husband and I are the ones on the hook for fixing or replacing things. If you don’t have money set aside for dealing with repair and maintenance issues, these kinds of surprises can take a big bite out of your monthly budget.

5. Homeowner’s insurance. Everyone should carry insurance on their property. But renters get a financial break here, as well. Since renter’s insurance only covers the property you own within your rental unit — and you are not responsible for insuring the structure of the building in which you live, like a homeowner would be — you pay a great deal less in insurance premiums than do your home owning neighbors.

At the end of the day, I really do believe in owning my own home. But I believe that trying to own a home before you are financially ready is just as disastrous a decision as renting forever would be. Before you jump into home ownership, know what additional costs you might be facing. From there, you can decide if you want to rent for a few more years as you save up, or if you’re ready for a house right now.

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{ 18 comments… read them below or add one }

Darlene @GenerateNewMoney January 20, 2012 at 4:35 pm

I prefer renting. After many years of owning 3 different homes, my husband and I are now renting. We have been renting for the last 2 years and I feel like we have saved a lot of money. I find that it is so much easier to stick to a budget when renting versus owning because you don’t typically have any surprise home maintenance expenses, and yes we do get a lower rate on our home insurance.

Several months prior to selling and moving out of our last home the 4 year old dryer in our last house died. Repair guy wanted $400 to fix. Instead we bought a new one for $450, but it was still $450 that we could have used elsewhere.

In the 2 years that we have been in our rental home the dryer has died, the dishwasher has leaked, the furnace died two Christmases ago, and last Friday evening our hot water heater stopped producing hot water. This rental is only 15 years old by the way. All of these things were repaired within several hours and didn’t cost us a dime.

Who knows if we would have been able to afford all of these repairs had these happened in the house that we owned, especially the Friday night overtime that the landlord probably paid the plumber last week.

One other way that I know we save money is by not doing any renovations. When you own a home there always seems to be something that you want to change or update. But here we don’t want to spend money on someone else’s house, so as long as it is clean and looks good, we don’t spend any money on it.

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Holly January 20, 2012 at 6:39 pm

I disagree. My landlord is in business to make a profit. It’s not charity. The renters do pay for all owner expenses and then some.

My landlord passes on the cost of insurance, taxes, maintenance, and mortgage payments to us. He budgets for repairs, snow removal, garbage pickup, and heating oil. We pay that, not him. Those costs may be hidden when you rent into a single payment, but you’re certainty paying the costs as a renter just as you would as a home owner.

If your landlord finds themselves going over budget, then they raise rent when your lease is up for renewal. Well, either that or they don’t fix problems (like an unscrupulous landlord I once had).

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Mandy Barrington January 20, 2012 at 7:50 pm

You’re right, Holly — landlords have to make a profit or at least break even. As a rental property owner, former homeowner, and now a renter, I much prefer renting at this point in my life. When I calculated all of the interest from my mortgage I would have paid the bank triple the selling selling price of my previous home had I kept it. That interest beefs up the monthly mortgage. However, my landlord paid cash for my rental house as an investment, which I never would have been able to do. That lowers the monthly payment. It all seems to even out about the same, plus I have the piece of mind that if I have to/need to move (job change, etc), I won’t be sunk in debt with nowhere to turn. When my husband and finish saving up the money, we plan to build a house debt-free. It’s a big goal, but I’m completely done with debt, including mortgages.

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Tyler S. January 21, 2012 at 3:34 am

There are plenty of ways that renters can enjoy saving more money that homeowners, but I think at the end of the day, homeowners can take pride in having something to show for the time and money they’ve put into their home. As a current renter myself, I am enjoying some of these savings, but I’d still like to own a home in the future.
It comes down to personal preference really, as renters are relatively free to move about, where homeowners will be hesitant to look into new job opportunities due to being tied down with their property.

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andy January 22, 2012 at 6:00 pm

Dont forget that the interest on your mortgage is tax deductible. Also, as far as realtor fees go, real estate commissions are figured into that market value. If you sell your home without a realtor to save money you can expect to get 6-10% less for your home than you would have if you had used an agent. With current interest rates and the current state of the rental market it is many times less $$ per month to buy something than rent. There are many places in my area (Chicagoland) that would cost me about $700-800/month and I could easily rent for $12-1300/mo.

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Patrick R. Carlson January 25, 2012 at 10:16 am

It is true that interest on your mortgage is tax deductible, but you have to itemize your deductions to be able to take the deduction. Depending on your specific situation, this may or may not be advisable.

If you combine living in a place with fairly inexpensive housing (or just have a small mortgage anywhere) with the extremely low mortgage rates many people have nowadays, you may not pay enough interest to make it worthwhile taking the deduction. Many people mistakenly believe they will be able to deduct interest if they buy a house, but you have to actually look at your tax situation before arriving at that conclusion.

And you still don’t get a deduction on repairs and maintenance on the home, even if you itemize.

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Brady January 22, 2012 at 6:47 pm

1)The mortgage interest is tax deductible, so it’s not a big deal.
2)Homeowners are building equity, so they are essentially paying rent to themselves, unless their home is losing value, which has happened to a lot of Americans in the past decade, but probably not in the past year.
3)Why anyone would use a real estate agent nowadays is beyond me. Sell it online at ISOLDMYHOUSE dotcom and save 15-30 grand!

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Richard Kawalek January 26, 2012 at 10:26 am

The mortgage interest is only deductible to the extent that it exceeds the standard deduction, currently $11,400 for a couple. A family buying a $225K home (the current average new home price) with a thirty-year mortgage will never pay more than the standard deduction in interest per year. Hence, paying interest is of no value to them beyond what Uncle Sam will give you for free. Only those borrowing more than a million dollars really get a substantial interest deduction.
Also, equity building is a very very slow process with a thirty-year mortgage. For that $225K home, the average buyer will have paid over $75K in payments during the first five years, but will have less than $20K of equity. And the additional costs for property taxes, insurance, fees, and maintenance will have added another $28K to the mortgage payments.
Owning a home is one of the greatest experiences possible, but let’s not be confused about the true costs. It makes us sharpen our pencils and think a little harder about buying the right home with good value.
I explain these and other misconceptions of home-buying in my forthcoming book: “Before You Build or Buy: The Five Myths of Home Ownership – and How to Save Over 20% on Your First Home” Hope you have a chance to read it.

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Judith Burns January 26, 2012 at 8:08 am

For me, owning is the only way to go. Not only is my monthly payment ($254 for mortgage and $216 for taxes and insurance) for a three bedroom home half of what I would pay for a one bedroom apartment, I like fixing up my home the way I want without checking with anyone else. And, not having neighbors right on top of me and being able to have as many pets as I want makes it the all round right choice for me. Renting might be good for some, but there is nothing like living in a neighborhood of home owners with a good school district. People just need to figure in the extra expenses of home ownership into the overall picture.

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Jean January 26, 2012 at 11:46 am

Yea, I hear you on the maintenance aspect. It’s so easy if you’re a tenant and can just call and get the thing fixed but when it’s your responsibility, it can be a pain for sure! We recently had a concealed pipe crack and had to break down the side of the bathroom wall to get it fixed up. Took a whole week to get the work done. But hey, got new tiles that I really like this time!

-Jean

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Neil January 27, 2012 at 11:02 am

Don’t be fooled. Property tax, mortgage interest, and homeowners insurance are built into the rent with usually money left over to pay for repairs. So in actuality, a renter is paying for everything you mentioned (except closing costs)…its just implicit, not explicit.

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Elaine February 4, 2012 at 3:45 pm

Agree with everything Emily said, and more. How about the emotional toll of second-guessing yourself about whether you bought the “perfect” house? At least with an apartment you can just leave at the end of the lease period — usually a year, but six months in many cases.

The same is true with regard to your neighbors. While you may not like the many, many people you need to share space with in an apartment complex or subdivision, there’s the comfort of knowing that either you or the worst offenders will likely be moving on at some point in the not-too-distant future.

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ryan February 22, 2012 at 1:54 pm

Its all about age! If your under 50 and need a new job, try selling your house, paying closing costs and underwater costs! Then get to new area with new job and give down payment! That’s crazy. I love renting – care free living, and if I hate a nieghbor or some comes up move and rent some place else. All these people saying they love owning a home, must of got lucky and had a steady job for 25+ years. Not anymore… you miss a house payment, knock-knock here comes the IRS and tax man after you.. can’t pay the rent , just move to lower cost place or move in with roomates. Owning a house stops you from living free period. Don’t be a slave to a lump of bricks.

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Mandy Barrington February 22, 2012 at 2:20 pm

Ryan, I agree with the “slave to a lump of bricks” sentiment and have another pretty good description for owning a home: “renting from the bank.” Of course, that’s only if you have a mortgage, but very few homeowners truly own their homes these days!

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John July 3, 2012 at 6:50 am

Any expense is passed on to the renter. Saying your not paying property taxes or Homeowner’s insurance isn’t correct. If the property owner is paying it they are passing it on to you. You should also be buying renter’s insurance. The biggest advantage to renting is skipping the repair work.

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Brooke September 14, 2012 at 1:44 pm

I cannot believe that someone who writes a financial blog included #3. As with any business, the expenses associated with that business are passed along to the customer by simply increasing the price.
As for #4, yes it’s great to have someone else pay for, & do, the work. *If* they do it. I have a friend who’s renting an apt in which the roof in a corner of a room leaks in the rainy season. Moving is out of the question for her right now, and her landlord took pretty much the entire last rainy season to finally throw a tarp over that leak. I don’t even want to think about how he’ll handle any plumbing problems that happen…or how ridiculously long he’ll take in handling them.
When you rent, you’re at the landlord’s mercy. When you have a mortgage, you’re at the bank’s mercy.

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Karen Kay August 8, 2013 at 11:37 am

I think homeowner versus renting requires a lot of decision making on your personal needs and wants. When I was much younger and not really looking for long term commitments or responsibilities, as well as more sociable, then renting was much more appealing. For my purposes, I bought my own washer and dryer and all of my appliances. And I didn’t have a steady job most of the time. But I did work , sometimes a few jobs. But as the years went on, I found that being a homeowner fit me a lot better. I did the “flip” on 3 houses and paid off this house and property, so no one owns me. For what I do pay on what I think is my last house on a monthly basis, I can’t live anywhere else as inexpensively and have as much bang for my buck. The only lucky break I think I got on this house, was that the property was really cheap. But that didn’t come without an exhaustive search. My reasons for being a homeowner have changed over the years. I did think at one time that the equity that I built into my home would bring in a profit. I no longer think of it as an investment, but as my retirement home. I was quite ill for some time and having a bit of property to work in when I felt well, was worth it’s weight in gold. I have had to replace cracked pipes, have had some serious issues “fixing” stuff, replaced appliances etc., but feel it absolutely worth it. Believe me when I tell you that it can take just as much time to get a good plumber into your house as it would take a landlord to fix something in a rental. And in the long run while you are thinking of creative ways to keep yourself and a six month old baby warm in your rental when the landlord takes the furnace out in October and doesn’t replace it by the time the snow falls, it can cost you just as much as if you were a home owner. It does depend on how you look at it. Besides, I got tired of making someone else’s profit. Even though I don’t make any money on being a homeowner, I do feel rich and prideful and will try to stay in my home as long as I can.

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Ron September 5, 2013 at 11:04 am

Interesting article and comments. Arguments can be made for both Buying and Renting: I am an owner but rented for about half of my adulthood. Ownership can be very expensive as well as better apartments. My preference is of no importance to others but I am inclined to point out that owners have many more expenses than listed above..Yes, I agree that renting has built in expenses but owning has so many expenses other than those mentioned. Here is a short list off the top of my thoughts: PS: I started this list but had time to finish about half of the items. The ones listed should be included in anyone’s assessment of deciding to buy or rent:
Maintenance & Repairs:
Yard/Lawn: $ per Month $ per year
” Grass:
” cut & trim………………. _______ ” ________ ”
Patch small area
” Replace all Grass
” Fertalizer
” Mower :
” Purchase or Replace
” Gas
” Blades
” Repairs

” Weed-whacker:
” Replace Whacker
” String
” Blower :
Purchase or Replace
” Trees & shrubs:
Purchase or Replace
Trimmers
Cutters
Saws & Blades
” Sprinklers: in South
Minor – (Heads)
Major – Pipe-Pump(s)
Max – Replace System
Roof:
” Minor repairs/maintenance ……………………………..
” Major repairs/maintenance……………………………..
Sorry list is getting too long..did not itemize things like Paint or
Windows:
Minor (glass)
Major (whole window}
Max (replace all)
Termites:
Damages
Professional Tent/Treat
Furniture
Appliances
Doors
Ceilings
Plumbing
Electrical
Only fair to include these items, or so it seems to me..
.Happy Owning or Renting whichever you decide.

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