Be Prepared — 3 Bills Homeowners Pay That Renters Don’t

Is buying a home in your future? Congratulations — it’s in mine, too! Unfortunately, becoming a homeowner means more than just paying a mortgage lender every month. You get to take on other new bills as well. Here are three that you weren’t paying as a renter, but will need to add to your budget as a homeowner.

1. Property taxes

Property taxes are the first of the new bills you’ll be taking on if you buy a house. Depending on where you live, these can be very manageable indeed — or they can cost an arm and a leg. The Motley Fool amassed a list of property tax rates by state, and New Jersey won for the highest, with a median annual tab of $8,928. Ouch.

Property taxes are how municipalities pay for schools, libraries, and more — they’re a social good. But that doesn’t mean we have to enjoy paying them. Just be mindful of this new cost if you go from renting to owning, and note that it’ll likely be easier to pay them via your mortgage escrow account, if you’re given this option. Otherwise, you’ll have to remember to save ahead of time.

2. Homeowners insurance

Once you buy a home, you’ll need to insure it. This will be required if you’re buying with a mortgage loan. Your lender will want to know that its collateral is protected, after all. But even if you’re buying a house in cash, going without insurance is a serious mistake.

If you’re renting now, you might have a renters insurance policy — this is a good way to ensure your personal belongings in your apartment or rental home are covered in the event of a covered disaster, like a house fire or severe weather. But homeowners insurance is a bit different in terms of what it covers and what it costs. It won’t just cover your items inside the home — it covers the house itself, as well as any additional buildings on your property (like a detached garage).

And it likely won’t be cheap. Realtor.com reports that the average annual cost of homeowners insurance is $1,900, but your own policy could cost more or less, as it depends on the size of your home, where you live, and numerous other factors. Renters insurance, on the other hand, is cheaper — $14 to $25 a month, according to USA Today. That’s an annual cost of just $168 to $300.

3. Maintenance and repairs

If there’s anything I’ve learned from many years of renting, it’s that there are degrees of landlord. Some will cheerfully pick up the tab for a maintenance issue or a repair, no matter what — even if you’re the one who broke a bedroom window by killing a wasp with a hardback book (true story). Others will leave your texts on “read” for weeks as you watch a leak under your kitchen sink get worse.

Suffice it to say, I’m not unfamiliar with trips to the hardware store to buy smoke detectors or an emergency call to an electrician — even as a renter. But when I buy a house, I won’t even have the option to ask a landlord to take the reins. And it will be in my best interest to spend the money on regular maintenance tasks, like keeping my gutters cleaned out and monitoring my basement for water leaks. The bills to repair a problem borne out of neglect are a lot more costly than keeping up with the maintenance to begin with.

How can you cope?

First, having an emergency fund is even more crucial if you’re a homeowner. Do yourself a favor — as you prepare to buy, make sure you’re prioritizing this. If your emergency fund could use some help, getting a side hustle could be a good idea. Whatever extra money you earn (less taxes) won’t already be committed to cover your bills, so you can put it in a savings account to keep it ready for that middle-of-the-night emergency phone call to your local plumber.

Speaking of plumbers, now is a good time to ask local homeowner friends and family for recommendations for the best ones in your area. Ask about HVAC technicians, electricians, foundation repair services, and any other tradespeople you might need as a homeowner. If you’ve got a handy list at the ready, you won’t waste valuable time combing through Google when your heater goes out on the coldest day of winter.

You also have options to save money on homeowners insurance. Costs are skyrocketing in some places, but you still likely have more than one insurer in your area. Call around (or click around) and see about getting quotes for your home. If you bundle home insurance with auto insurance, you could switch and save on both — my colleague Dana George saved over $1,600 this year by doing so.

You likely don’t have many options to reduce your property taxes, I’m sad to say. But knowledge is power. Before you buy, be sure to dig into how much the previous owners were paying every year on the house you’re considering. Knowing roughly how much to expect ahead of time will help you plan. And keep in mind that property taxes and homeowners insurance premiums tend to rise over the years.

Owning a home is far and away more expensive than renting, and that’s due to these extra bills homeowners take on. But now that you know what you’re facing, you’re in a better position to buy a home with confidence.