7 Homeowner Costs Renters Don’t Pay

Renting is usually cheaper than buying—here's why

By and large, it is less costly to rent a home than to own one, thanks to numerous expenses involved in home ownership. Renters pay a monthly fee to live in someone else’s property, while homeowners pay a monthly mortgage to eventually own the property in which they live. But those mortgage payments, as well as the initial down payment to secure the home, are just the tip of the financial iceberg. There are also property taxes, as well as maintenance and other costs, many of which continue for as long as a home is owned—even after the mortgage is paid off.

In some situations, the lower cost of renting versus owning may make renting the better choice. But conventional wisdom says that owning your own home is better than renting from someone else. After all, a home is the single most expensive asset most people will ever possess. So if you are a renter who wants to become an owner, it's important to know the costs that homeowners have to cover and think through your decision carefully. Here is a detailed look at seven of those costs.

Key Takeaways

  • Renters do not have to shoulder the burden of paying for the upkeep of the physical property in which they live.
  • Homeownership comes with a number of costs beyond the price of the home, including property taxes, mortgage interest, the price of homeowners insurance, home maintenance bills, real estate lawyer fees, landscaping costs, and homeowner association fees.
  • Homeowners, however, are eventually rewarded for their monthly mortgage payments by owning the property where they live outright.
  • For most people their home is the most expensive asset they will ever possess.

1. Property Taxes

Do renters pay property tax? Only in the sense that smart landlords factor the cost of property tax into the monthly rental amounts they charge, in order to turn a profit. But it’s the property owner who actually pays the tax to their municipal or local government, county, and state to fund such things as public works, the wages of government workers, and public school boards. It is an expense that homeowners can expect to pay for as long as they own their home. Property taxes are assessed based on the current value of your home and can change over time to reflect your home’s increase or decrease in value.

Property taxes can also vary depending upon geographical region, so you should always investigate what those taxes are in the area where you’re looking to buy. In 2019 the national average for property taxes for a single-family home was $3,561 per year, according to an analysis conducted by ATTOM Data Solutions.

2. Home Maintenance

Homeowners can’t simply call the landlord when the appliances need to be replaced or the hot water tank stops working. All these home maintenance tasks—from buying a new microwave oven to replacing a roof—are the responsibility of the homeowner.

Long known in the insurance industry is the 1% rule, which says that homeowners should budget at least 1% of their home’s purchase value per year toward maintenance. Therefore, if your home is worth $220,000, you should plan to set aside at least $2,200 toward maintenance costs. Other methods include the square foot rule, which says to save $1 for every square foot of livable space every year, and the 10% rule, which posits putting aside 10% of your main monthly expenses—mortgage payment, property tax payment, and insurance payments—every month for maintenance.

3. Mortgage Interest

The amount you’ll pay in mortgage interest over the duration of your mortgage depends upon the length of time over which you amortize your mortgage, the frequency of payments, and the rate and type of interest. A fixed-rate mortgage will always have the same interest rate, while an adjustable-rate mortgage will fluctuate over time. Each has its advantages and disadvantages.

So how much interest can a homeowner expect to pay over the course of their mortgage? Let’s say you have a $220,000 mortgage that is amortized over 30 years at a rate of 5%. In such circumstances you can expect to pay roughly $205,162 in total interest—nearly equal to the cost of the house itself.

4. Home Insurance

Renters may have to pay renter’s insurance, but homeowners insurance tends to be a lot more expensive. Renter’s insurance typically covers the contents of a property, while homeowners insurance must account for the value of the physical structure of a property as well. If a home is lost in a fire or natural disaster, insurance will cover the remainder of the mortgage or the cost to rebuild or repair the home.

Insurance policies offer different levels of protection and coverage, and premiums can vary greatly. The national average cost of homeowners insurance in 2017 was $1,211 per annum, according to a November 2019 report by the National Association of Insurance Commissioners (NAIC).


The average annual cost of homeowners insurance in the U.S., according to the National Association of Insurance Commissioners.

5. Real Estate and Legal Fees

The mere act of buying or selling a home comes with costs. The seller is generally faced with paying the real estate agent fees, which typically come in the form of a commission. According to Redfin, an online site that represents real estate agents looking to sell homes, agent commissions tend to run about 6%. If you sell your home for $220,000, that means you are looking at paying about $13,200 in commission.

Also, both buyer and seller must pay legal fees to cover the transfer of title. As property transactions are complex and subject to specific state and local rules, it can be wise to hire a lawyer to help you navigate the process. Legal fees, of course, vary depending upon the lawyer you choose. The national average for legal services is $225 per hour, according to Thervo.com, a legal information website. Of course, the actual cost will depend on the requirements and experience of the legal team, as well as geographical location, and can run as high as $400 an hour.

Real estate lawyers also charge for additional closing costs associated with the purchase or sale of your home, so you should always budget a bit extra.

6. Landscaping and Lawn Care

If your home has a yard, you will definitely need to budget for landscaping and lawn care costs. Paying a landscaping company to care for your lawn could run you about $45 per visit, according to Fixr.com, an informational site for home maintenance and repairs.

If you choose to do the work yourself, your costs will undoubtedly be lower, but you’ll still need to consider expenses such as fertilizer, tools and maintenance equipment, tree maintenance, and seasonal plants for the garden. Although you might want to think it is free if you do it yourself, you do need to think about the time cost of such activities as mowing the lawn and shoveling snow.

7. Homeowner Association Fees

Some developments charge a homeowner association (HOA) fee or condominium fee. These fees often cover external building maintenance and landscaping costs for common areas. This minimizes the cost of any home expenses that are covered by the HOA fee, though these fees won’t cover any internal maintenance costs associated with your unit.

HOA fees may not cover maintenance or construction projects if the HOA doesn’t have enough money in reserve to cover them. This may result in a hefty cost to the owners in a development. Those in HOAs should set some money aside to cover such unforeseen expenses associated with the maintenance of their communal property.

The Bottom Line

If you are a renter, remember that your landlord is paying all these expenses for the property that you’re already living in. Therefore, they are being factored into your rent. Other fees could include paying for an extra parking spot or the loss of part or all of your security deposit. Also, real estate values tend to increase over the long term, though the real estate market is definitely not immune to short-term fluctuations.

If you can make a long-term commitment to owning a home, there is a definite potential to earn a profit from the sale of your property. But keep in mind that there are more expenses involved in owning a home than are immediately apparent. Just because your mortgage payments are less than your rent doesn’t necessarily mean that you’ll come out ahead in the short term.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. New York State Department of Taxation and Finance. "How is my tax bill calculated?" Accessed Sept. 14, 2020.

  2. ATOM Data Solutions. "U.S. Property Taxes Levied on Single Family Homes in 2019 Increased to More Than $306 Billion." Accessed Sept. 28, 2020.

  3. American Family Insurance. "How Much Should You Budget for Home Maintenance?: Calculating How Much to Budget for Home Maintenance." Accessed Sept. 14, 2020.

  4. National Association of Insurance Commissioners. "NAIC Releases Report on Homeowners Insurance." Accessed Sept. 14, 2020.

  5. National Association of Insurance Commissioners. "NAIC Releases Report on Homeowners Insurance." Accessed Sept. 14, 2020.

  6. Redfin.com. "How Real Estate Commission Works." Accessed Sept. 14, 2020.

  7. Thervo.com. "How Much Are Attorney Fees?" Accessed Sept. 14, 2020.

  8. Fixr.com. "Lawn Maintenance and Mowing Cost." Accessed Sept. 14, 2020.