5 Ways Owning a Home Costs More Than Renting

As a person who's been a renter nearly her entire adult life, it's the conversation I love to hate. I'll get to talking with a friend who owns a home, and I'll find out their mortgage payment is less than what I pay in rent every month. It stings, but I have the data on my side: Owning a home costs more than renting one, despite that smaller mortgage payment.

Research from The Ascent found that in 2019, homeowners paid an average of $26,418 per year in housing costs, compared to $17,809 for renters. That extra $8,609 went toward costs renters either aren't responsible for at all or expenses that cost less for renters. Let's take a look at some ways owning your home will cost you more money than renting one.

1. The initial costs are higher

It likely won't surprise you to learn that the upfront costs of homeownership are significantly higher than renting. When you're signing a lease for a new rental, you'll be expected to cough up a deposit (in my experience, it's often equivalent to one month's rent), that first month of rent, and perhaps a cleaning fee you don't get back when you move out.

You'll probably have some move-in costs to cover, too (I have never once moved to a new rental and not needed to buy something). This could be a new shower head, curtains, or cleaning supplies because your new rental isn't as clean as you were promised it would be.

When you're signing a mortgage loan, however -- oh, those upfront costs! In most cases, a down payment will be the largest chunk of money a buyer puts into a home purchase. According to the National Association of Realtors, the median down payment for buyers in 2022 was 13% of the home's purchase price. Plus, buyers may have to pay the closing costs for their mortgage loan (often 2% to 5% of the home's purchase price) upfront, unless they roll them into the loan or have the seller pay them (not a guarantee, especially in a seller's market).

2. Your insurance will cost more

If you're a renter, it's always a good idea to get a renters insurance policy. Your landlord will have a rental homeowners insurance policy, but this won't cover your belongings in the event of, say, a fire or other peril; that's what renters insurance is for. Renters insurance costs an average of just $14 to $30 per month, according to 2021 data amassed by Progressive, which isn't bad at all.

Homeowners insurance, on the other hand, will cover the whole property when you own your home, including the house itself (and any outbuildings, like a detached garage) and its contents. As a result, it'll cost more. In 2020, the average cost for an annual premium was $2,305, or $192.08 per month.

Costs vary based on where you live, the type of home you have, and what kind of coverage you want. But know that it'll be more expensive than renters insurance, and if you have a mortgage, it's likely to be required by your lender (and even if you bought your home in cash, it's a terrible idea to forgo insurance).

3. You'll pay property taxes -- which often rise over time

If you rent, your landlord covers the taxes on the home you live in. But if you're looking to buy, you'll be paying this expense. Property taxes also vary widely depending on where you live, and it's definitely something to consider when deciding where to buy a home. And if homes in your area are climbing in value (as they did in many areas during the buying frenzy of 2020–2022), your property taxes are likely also increasing.

4. Repairs and maintenance falls to you

As a renter, it's likely that most of the repairs and maintenance around your home have been paid for (or even completed) by your landlord. But when the hot water heater stops working or you've got a leaky roof as a homeowner, you'll need to whip out your checkbook or your credit card to cover the cost of repairs. The same goes for routine tasks like cleaning out your gutters or changing your furnace's air filters.

5. Utility costs could be more

If you're renting an apartment or a smaller home, it's likely that your utilities don't cost you too much. But utility costs are one spot where you might have some sticker shock when going from renting to owning. If you buy a bigger home than the one you're renting, you'll have more square footage to heat and cool. And you may be responsible for costs you've never paid before. As an example, I've only rarely had to pay the water bills for my rentals. When I buy a home, I'll have to cover all the utilities.

As you can see, becoming a homeowner means signing on for a host of costs, both upfront and ongoing. Be sure to consider your finances as a whole when making the (very big) decision to buy a home.