Are you considering renting while you try to save for a home mortgage down payment for a new home? If you are considering this you need to think about the hidden costs of renting a home while you begin your savings plan so that you can set your budget accordingly. (Please note that this is the fourth article in a series about "renting versus buying". You may wish to read the first three articles in the series first: pros of renting versus buying, pros of buying versus renting, and the hidden costs of owning.)
Utility Expenses Can Add Up Quickly
Many properties will charge the renter for electric and gas service. If you are preparing to sign a lease to rent a home make sure you check the terms and find out if you are responsible for these costly utilities. When you view the apartment, find out if the appliances, water heater and heating system are energy efficient. It would also be wise to see if the unit has energy efficient light bulbs in all outlets as this can save you a considerable amount of money that can be used towards your down payment. Utility companies may also require hefty deposits before they can be turned on and this will impact your savings plan (and may even lower your savings balance).
Hidden Maintenance Expenses For Renters
Carefully check your lease to find out if you are responsible for any particular property maintenance. Items like snow removal, lawn maintenance (while they can be done by you) may not be included in your lease. If you are not able to do perform these tasks yourself you may be forced to pay to have them done and this can impact your ability to save for your down payment on your new home. There are a variety of options to reduce your maintenance expenses and you should carefully investigate all of them.
While the property owner will be required to maintain liability, fire and other types of insurance you may need to purchase renters insurance. Rental insurance covers items that are not typically covered by the owner of the property. Renters insurance can protect your personal property against fire, theft and vandalism. It can also protect you in the event that you are held liable for injuries to a person or damage of property whether this occurs in your rental unit or elsewhere. While not all property owners will require that you acquire rental insurance, some may, and in fact it's probably a good idea to have even if it means saving a little less for your down payment on your new home. While the monthly payments may affect your immediate savings, it's important that you consider what not having this insurance can do to your savings.
Not all properties have available parking, especially if you are renting in a large city. Carefully review the terms of your lease agreement and find out if you have parking available with your unit. Otherwise you may have to pay additional parking fees at private or public parking areas which can severely impact your ability to save for your home down payment.
Does your lease have a pet clause where you need to pay additional rent to keep your pet? In addition to this you need to know what the town licensing requirements are for pets in your area. Neutered and un-neutered pets generally have different fee structures from town to town. Additionally, if you are moving from an area without a leash law, you may now be subject to that which may require your purchase an adequate lead or play area for your pet. (Also in your quest to save up your down payment, you will want to check out our tips to save money on your pet.)
Trash Expenses When Renting
Not every city or town includes the cost of trash with their taxes that are charged to the homeowner. In some municipalities they require you purchase bags that are specifically marked for use in that town. If this is the case where you are moving you will need to carefully budget the cost of the bags you anticipate using into your budget along with savings budget for your home down payment.
There are certainly other hidden expenses that you may incur if you are considering renting a home. Make sure you thoroughly investigate all of your hidden expenses before you sign a lease as all of these expenses will impact your ability to save money for a down payment on your new home. Keep in mind that the more ways you can save money the better for you. Next in our series of articles about the pros and cons of owning your own house, we will analyze the income tax deductions of owning your home.
This article is written by guest author Doreen Martel exclusively for Save For House.