Our culture constantly bombards us with the message that home ownership is the pinnacle of financial maturity and success. The problem is that there are a lot of factors and costs that are hard to anticipate as a renter. Don’t get me wrong, there are numerous wonderful benefits to home ownership like tax breaks and the freedom to do whatever you want with the property, but it isn’t necessarily the obvious winner over renting.
Below are my top ten hidden costs that I experienced since making the transition from renting:
- Property Taxes – They started at $190 a month and are now $278. A 46% increase in 4 years. This is for our 900 square foot condo in South New Jersey.
- Association Fees – $100 a month when we started. $200 a month now. A 100% increase in four years.
- Sewer Bills – $25 a month
- Maintenance Costs – Since we bought a tiny 8 year old house we haven’t much, but things like new faucets and dryer vent cleaning do add up.
- Hassle Factor – When the refrigerator breaks as a renter, you call the landlord and it should quickly be replaced at no cost. As an owner you must quickly rush to the store and buy a refrigerator yourself.
- Utilities Formerly Covered By Rent – When I was renting we were shielded from the true costs of thing like water and gas, but these can run hundreds of dollars a month depending on the house.
- Mortgage Interest and PMI – I know there is a tax write-off, but it is depressing to see 80% of you mortgage payment going to interest. Plus, to get a tax right off you have to give the bank thousands of dollars a year. Giving your money to a charity of choice gets you the same write-off, but your money goes to a good cause. For Private Mortgage Insurance we were paying $50-80 a month, because we didn’t put 20% down. Luckily our house appreciated fast and we were able to get rid of that cost.
- Closing Costs – Renters rarely realize how big a check you need to write at closing, often thousands of dollars that isn’t part of your down payment.
- Desire To Upgrade and Furnish – When you rent your desire to paint and buy decorations is usually tempered, because you know the place isn’t yours. Once we had our own place, we wanted to paint, decorate, upgrade, and furnish. Often more than once in the same room.
- Stuck Factor – With renting you can up and leave at any time. With a house, you have to sell before you can do anything. If the market is down or prices drop, you may even be stuck in your house or have to shell out money at closing to sell it.
Owning a house brings a lot of joy and freedom, but there are definite benefits to renting that often get overlooked when you get enamored with wanting to own a home. I know I didn’t have a good sense of what owning a house entailed. I am glad that we learned these lessons with a small inexpensive house!