Comparing Costs Between Renting & Buying Property

The cost of renting versus buying is more complex than simply comparing a rental payment versus a mortgage payment. Ultimately, the payments you invest in your home are an investment, while paying rent will always be a payment. When you pay a mortgage, you are building wealth. The following factors affect the cost of owning a home:

  • Property taxes - When you own a home, you owe taxes to the local, state and federal government. The costs of the taxes vary based on where you live. There are no additional taxes for renters.
  • Insurance costs – Home insurance is required when you own a home. If you live in a perilous area, your home owners insurance may be an additional hundreds of dollars each month. Rental insurance, although a great thing to have, is optional. Renters are not required to have any form of insurance.
  • Utilities costs - Renters most often pay for heating and cooling costs. They are also responsible for phone and cable costs. Homeowners are responsible for all utilities, including water and trash payments each year. These payments, depending on the municipality, can add up to thousands each year.
  • Mortgage insurance - If you do not pay at least 20% down on your home purchase, you will be required to pay an additional cost to insure your mortgage. This amount will vary depending on your credit score, economic market conditions and PMI Company.
  • Homeowner association fees - Condos, town homes and apartments usually have HOA fees. There are also single-family properties that require association or mello roos fees. The fees are used for upkeep and maintenance of common property grounds. There is no such fee ever charged to renters.
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