Purchasing a home is one of the biggest purchases most people will ever make. The choice to purchase or lease is often driven by financial variables, such as income, job stability and savings. It is important to examine the gaps between the bills of a tenant and people that a homeowner is responsible for before making any long-term home choice.
Shared Bills
Both homeowners and renters are often responsible for some of the same monthly invoices. Specifically, utility bills are difficult to avoid. Paying for natural gas and power is ordinarily the responsibility of the consumer, who must set up an account and pay an activation fee upon taking a new residence. Other bills that renters and homeowners often share include cable television, Internet service and phone bills.
Rent Inclusive
Among the greatest economic benefits of renting an apartment would be having several invoices covered by the landlord. Property owners generally cover invoices like water service and garbage pickup. Some landlords may also supply free utilities, or free heating (meaning they pay for natural gas service). Nonetheless, in order for a landlord to make a profit and pay for expenses, she must incorporate the cost of these bills in the monthly lease tenants pay. While simpler for the renter, free utilities may mean higher rent every month.
Mortgages
While renters are responsible for a predetermined monthly lease payment, homeowners must pay back the mortgage used to buy the home. In the case of an adjustable rate mortgage, or ARM, the total amount of the monthly mortgage bill may increase over time since the creditor increases the rate of interest. However, as soon as a mortgage is repaid, the homeowner will observe the bill disappear, while renters must keep on paying each month until they move out.
Insurance
Both homeowners and renters may buy property insurance. However, this represents a much higher bill for homeowners, who are generally insuring not only their possessions but also the house itself. Renters’ insurance covers only the contents of the house, whereas the landlord’s own insurance handles the apartment building and grounds. Renters insurance may be optional at the discretion of the renter, but a few landlords require tenants to buy insurance upon proceeding in.
Taxes
Taxes are also very different for renters and homeowners. For the homeowner, mortgage interest may be tax deductible, providing an advantage that renters lack. However, only property owners are accountable for land taxation, which relies on the value of the property and belongs to fund local government services and public schools.