For anyone considering a move, one of the biggest factors in the decision is usually cost. Regardless of the size of your budget, getting the best value for your money is always a top priority. And for many people, that leads them to wonder: is it cheaper to rent or buy? This article covers what you should about the cost of homeownership and the various homeowner costs renters don’t pay.
We’ve created a handy resource that breaks down the costs of homeownership, including all of the regular expenses that rents don’t have to deal with. With this guide, making an informed choice on whether or not renting is better than buying will be much simpler – and you can keep hundreds (or even thousands) of dollars in your pocket.
Renting is Usually Cheaper than Buying – Here’s Why
Generally, when you’re comparing similar properties in the same area, renting ends up being the less expensive option.
Even in scenarios where the monthly mortgage payment for a home is cheaper than the rent for comparable property, that doesn’t necessarily mean that the homeowner is getting a better “deal.” In fact, there is a wide variety of expenses involved in homeownership – many of which you don’t know about until you’re seeing the bills stack up.
From the moment you start the moving process, owning a home starts to get expensive. There are realtors to pay, legal fees to manage, and a variety of costs associated with the purchase itself. Then, long after a home’s mortgage is paid off, there are still expenses to be considered: property taxes, maintenance, HOA fees, and more. But for renters, many of these costs don’t exist.
- Homeownership comes with many, often unexpected expenses that go beyond the monthly mortgage payments. Factors such as property taxes, homeowners’ insurance, landscaping costs, and others can quickly add up.
- Renters aren’t responsible for the general upkeep of their residence, which can save them a considerable amount of money.
- Both the purchase process and the monthly expenses of a home are typically far higher for homeowners, compared to renters.
- Overall, renting is nearly always less expensive than owning a home.
Homeowner Costs Renters Don’t Pay
Let’s take a closer look at all of the expenses that are tied to homeownership – specifically, the homeowner costs that renters don’t pay or have to deal with.
One of the most common questions asked about the cost of renting vs. owning is: do renters pay property tax? Although some property managers/landlords may take property taxes into account when setting the monthly rent price for a home, renters do not pay property taxes.
The property owner (a.k.a. the homeowner) is the one responsible for property tax. These taxes are paid to the municipal/local government, county, and state, and are used to fund a wide range of public services.
Homeowner costs involve paying property tax for the entire time they own a property, regardless of whether the mortgage is paid off. Taxes are based on the current market value of your home, as well as your geographical location, and usually change from year to year.
There’s no question that one of the biggest benefits of renting is not being in charge of the tasks of home maintenance. From broken appliances to replacing the air filters, home maintenance can be a lot of work – and a lot of money. For homeowners, it all falls on their shoulders, including both expected maintenance and surprise repairs. But for renters, both the responsibility and the bill aren’t theirs to worry about.
Industry experts recommend that homeowners plan to spend at least 1% of their home’s value on annual maintenance . So, for a home that’s valued at $250,000, you would want to budget at least $2,500 per year, maybe more for the average annual house maintenance costs.
Mortgage interest varies widely from loan to loan because it completely depends on the specific terms and duration of a mortgage. Your interest rate, type of interest (fixed rate vs. adjustable rate), and how often you make payments will all affect how much you spend on mortgage interest.
For first-time homeowners, it’s often an unpleasant surprise to realize just how much of the monthly payment goes towards the interest, rather than paying off the principal loan amount. For example, let’s say you have a 30-year mortgage for $220,000 and a 5% interest rate. By the time you’ve paid off the home, you’ll have paid about $205,000 in interest alone, plus the actual cost of the house – yikes!
While it’s true that renters typically have to pay for renter’s insurance, those costs are generally far less than homeowners insurance. A homeowner doesn’t just have to ensure the contents of the home, but also the physical structure itself. The insurance has to be able to cover the value of the property as a whole. If serious damage occurs to the home, the insurance policy must be used to pay for the remainder of the mortgage or the homeowner’s cost of rebuilding/repairs.
On top of that, many homeowners opt for coverage that protects them in the event of an accident on their property (for example, if a visitor injures themselves). So, even though the average monthly cost of homeowners insurance varies, it is typically much more than what renter’s insurance will cost you.
Real Estate and Legal Fees
Buying a home costs more than just the actual sale price of the property; you also have to account for real estate agent fees/commissions, legal fees to transfer the title, closing costs, and other expenses. Add to that what you’ll need to budget for moving and setting up a new home, and it can often feel as if homeownership comes with never-ending expenses.
Landscaping and Lawn Care
Do you want a home that comes with outdoor space? Even if you’re only looking at properties with small front lawns or minimal landscaping, you’ll definitely need to make plans for upkeep.
It’s possible to manage landscaping on your own, but you’ll want to consider the cost of supplies: a lawnmower, fertilizer, plants, tools, and other necessities. Or, you can hire a landscaper for regular maintenance and pay a fee instead. In contrast, renters aren’t typically responsible for outdoor maintenance. In fact, some rental communities (such as Wan Bridge’s BTR communities) take care of all yard maintenance as a part of the rental agreement.
Homeowner Association Fees
Homeowner association or condominium fees are intended to cover the costs of the overall maintenance of the community, such as landscaping common areas. The average cost of HOA fees can easily range into hundreds of dollars a month, especially for communities that offer amenities like playgrounds and parks.
Homeowners are responsible for paying these fees (which are dictated by the HOA or condominium management), but renters are not.
Renting from a Private Landlord: What You Should Know First
Are you ready to make the switch to a rental? Before you start searching for Texas homes for rent – and adding up your renters-only savings – there is one caveat.
If you rent a property from a private landlord, you could end up footing the bill for many of their homeowner costs and expenses. Because a private landlord has the right to include certain responsibilities in your tenant agreement, including landscaping, home maintenance, repairs, and more, many renters are unpleasantly surprised by unexpected costs and chores. And with more than 90% of Texas rental homes owned by private landlords, the odds aren’t exactly in your favor.
However, Wan Bridge is setting a new standard for homes for rent in the Lone Star State. Not only are our build-to-rent communities based on the principle of liveable luxury crafted exclusively for tenants, but we are one of the only BTR developers that also facilitates professional property management services. What does this mean for you? You’ll enjoy a beautifully built home with all the upgrades and details of an upscale home for sale, but with the conveniences of an expertly-managed rental – with no loopholes to worry about.
Find Wan Bridge Homes for Rent in Texas
When you do the math, it’s easy to see that renting can often be the best and most budget-savvy choice. Although there are certainly benefits to homeownership, there are significant challenges as well. And if you choose a single-family build to rent home within a Wan Bridge community, you can enjoy most of the perks without any of the hassles – it’s a win-win!
Wan Bridge is a one-of-a-kind Texas developer creating single-family communities exclusively for renters, offering a myriad of amenities and luxury home designs. In our Texas homes for rent, you can reap all the budgetary benefits of renting as well as the enhanced quality of life of a master-planned community. Our communities can be found in many of the most desirable cities in Texas, including Galveston, Pearland, Rosharon, and Denton.
Get more information about Wan Bridge and our BTR homes when you contact us today!
- American Family Insurance. “How Much Should You Budget for Home Maintenance?: Calculating How Much to Budget for Home Maintenance.” Accessed Dec. 15, 2021.
- National Association of Insurance Commissioners. “NAIC Releases Report on Homeowners Insurance.” Accessed Dec. 15, 2021.
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