Buying a home is one of the largest purchases most people will ever make. The decision to buy or rent is often driven by financial factors, including income, job stability and savings. It's important to analyze the differences between the bills of a renter and those that a homeowner is responsible for before making any long-term housing decision.
Both homeowners and renters are often responsible for some of the same monthly bills. In particular, utility bills are difficult to avoid. Paying for natural gas and electricity is usually the responsibility of the user, who must set up an account and pay an activation fee upon taking up a new residence. Other bills that renters and homeowners often share include cable television, Internet service and telephone bills.
One of the biggest economic advantages of renting an apartment is having some bills paid by the landlord. Property owners generally pay for bills like water service and trash pickup. Some landlords may also offer free utilities, or free heating (meaning they pay for natural gas service). However, in order for a landlord to make a profit and cover expenses, she must include the cost of these bills in the monthly rent tenants pay. While simpler for the tenant, free utilities may mean higher rent each month.
While renters are responsible for a fixed monthly rent payment, homeowners must pay off the mortgage used to purchase the home. In the case of an adjustable rate mortgage, or ARM, the amount of the monthly mortgage bill may increase over time as the lender raises the interest rate. However, once a mortgage is paid off, the homeowner will see the bill disappear, while renters must continue paying each month until they move out.
Both homeowners and renters may purchase property insurance. However, this represents a much higher bill for homeowners, who are typically insuring not only their possessions but also the house itself. Renters' insurance covers only the contents of the house, while the landlord's own insurance handles the apartment building and grounds. Renters insurance may be optional at the discretion of the tenant, but some landlords require tenants to purchase insurance upon moving in.
Taxes are also very different for renters and homeowners. For the homeowner, mortgage interest may be tax deductible, supplying an advantage that renters lack. However, only property owners are liable for property tax, which is based on the value of the property and goes to fund local government services and public schools.
- apartment building image by Christopher Dodge from Fotolia.com