As a first-time renter, you can’t forget about all the hidden costs that come up when moving into your first apartment. Some examples include moving costs, applications costs, pet deposits, and renters insurance. Another expense to add to the list is your security deposit.
But don’t let those two words fill you with fear; we’re here to break down what security deposits cover and show you the alternatives out there!
What is a security deposit?
A security deposit is something you pay to a landlord, property owner, or manager as proof of intent to move in, to make sure you take proper care of the apartment. Depending on the transaction terms, your security deposit can either be refundable or non-refundable. The landlord uses the security deposit as a form of security and can divert it to cover any damages incurred during the lease period.
How much does a security deposit cost?
Well, it varies. The cost of your security deposit depends on the location of the property and your individual lease. While some states have a pre-specified limit, many don’t. For example, in Kansas, the typical security deposit is one month’s rent for an unfurnished apartment and one and a half months’ rent for a furnished apartment. The . Check the state renting laws to find out how much you can expect to pay for a security deposit in your state.
Your credit score is another factor that can determine the amount of your security deposit. Your credit score tells your landlord or property manager if you’re a safe bet in terms of paying the rent. The riskier you are, the more landlords are likely to charge for a security deposit. You may want to check your credit score to see if you’re a “risky” tenant or not.
When do I pay my security deposit and where does it go?
Like your first month’s rent, you’re expected to pay your security deposit before moving into the apartment. Usually, the landlord will let you know all the fees you need to pay ahead of your move-in date. Make the payment promptly to keep things moving and prove that you’re genuine about moving in.
Your landlord or the property manager will usually place the deposit in an interest-bearing account. This happens within a month of your move-in date. In states like Massachusetts and New Jersey, residents must be provided with a receipt showing where the deposit is, and the account’s annual interest rate. No matter where it is kept, you can be certain that no one can touch your deposit except under extenuating circumstances. Like, for example, you cause major damage to the home.
What does a security deposit cover?
While security deposits are often refundable, your landlord may use it at the end of your lease agreement to cover any of the following:
1. Property damage
Your landlord can use part of your security deposit to pay for any repairs warranted by damages to the rental unit that occurred while you were there. Only serious damage counts here; normal wear-and-tear isn’t categorized as property damage.
2. Missed rental payments
If you miss any part of your rent, your landlord may use the security deposit to cover the loss after your tenancy ends.
3. Key replacement and cleaning costs
If you fail to return your keys to your landlord, the security deposit can cover the cost of replacing the key. And, if you fail to clean your apartment when you move out, the security deposit will likely cover the cost of hiring cleaners.