The Hidden Costs of Homeownership

When shopping for their dream home, many first-time buyers worry about fronting the bill for the down payment and closing costs. However, there are hidden costs of homeownership that impact the buyer as soon as they get their keys. 

While the list price may be in your budget, the true cost of homeownership could include budgeting for repairs, an HOA fee or a monthly condo fee. Your real estate agent can help you understand the ownership expenses that exist beyond the purchase price. 

A recent Bankrate study indicates that the average hidden cost of owning and maintaining a home in the U.S. is $18,000 per year. 

In addition to the mortgage, your costs will include property taxes, homeowners insurance and utilities. If you purchase a single-family home, the cost of lawn care and home maintenance are just some of the hidden costs that you should expect.

There’s a payment calculator on each Homes.com listing that helps future homebuyers estimate the monthly cost of their mortgage, property taxes and utilities. This calculator should give you a rough idea of some of the additional costs associated with purchasing a home. 

An ongoing expense is something that cannot be avoided. These include out-of-pocket costs for homeowners insurance, property taxes, HOA fees and utilities. Other expenses that can be avoided – but shouldn’t be neglected – include landscaping and home repairs. 

The rate of your home’s property tax can vary widely depending on your local tax rate, which is calculated depending on the home’s value. 

For example, if a home in Miami-Dade County is assessed at $300,000, it will be taxed at close to 1%. You can expect to pay about $2,900 in property taxes each year, or around $240 per month. 

Home insurance does more than cover the cost of repairs should there be a fire or a flood. It also covers the bodily injury of people who might get hurt on your property and any damage to their personal property. 

Though home insurance is not legally required to own a home, a bank will not approve a mortgage without it. 

According to Bankrate, homeowners insurance has an average annual cost of about $2,270 for a policy with $300,000 in dwelling coverage. This means that the cost of insurance can be about $189 per month. 

A seasoned homeowner knows that one benefit of renting is that you don’t have to pay for repairs when things go wrong. As a homeowner, you’re responsible for any costs associated with maintenance or repairs.

For example, Forbes reports that roof repairs for water damage, wear and tear, or age can average about $1,150. If you have plumbing issues, you can expect to pay a plumber between $45 and $150 per hour. Yearly services for your home’s heating, ventilation and air conditioning (HVAC) systems can also cost between $100 and $300.

There are other issues that you could run into as a homeowner, including electrical fixes, drywall repair, mold and pest control. 

If your dream home is part of a homeowners association (HOA), gated community or condominium, you will likely have to pay monthly or quarterly fees. 

The average monthly HOA fee is about $200. This fee may go toward the cost of amenities like a pool, tennis courts or clubhouse. They also fund the maintenance of roadways and landscaping, gardens or trails. 

Utilities are another one of those unavoidable costs that keep a house in order. The average household in the U.S. spends about $430 per month on utilities, according to Forbes. 

A missed payment could result in a lack of water, electric or gas. Some people also consider their internet, phone and streaming services as part of their utility costs each month. 

Though there are plenty of DIY landscaping practices out there for gardeners and suburban homeowners, some people prefer to hire a service. 

Landscaping isn’t just about lawn care and trimming trees. It can include service to clear leaves in autumn. If your home experiences flooding during downpours, a landscaping professional might be needed to regrade the land around your house or install a french drain. 

Labor costs average between $50 and $100 per hour, according to Forbes, but the cost will vary depending on your location and the service. 

To prepare for the hidden costs of owning a home, you will want to create a budget, build an emergency fund and prepare for any unexpected expenses. This is especially important if you buy your home with known issues where you need to be prepared to cover the cost of major repairs. 

A comprehensive homeownership budget includes: 

• A list of everything that is a current ongoing expense, including utilities, taxes and insurance. 
• Costs for upcoming projects or planned improvements. 
• Desired or necessary services that your home requires on a regular basis. 

After you have a list of your potential costs, consider using the 50/30/20 rule to create a budget. 
This rule suggests that every month, you allocate 50% of your income to take care of needs and bills, 30% to your wants and 20% to savings. 

Many financial advisors suggest that the best emergency fund should be enough to cover your expenses for three to six months. 

Ideally, your emergency fund can be built up over time. Consider opening up a high-yield savings account. You can set up automatic transfers after each pay period to take the guesswork out of saving for a rainy day. 

Minimizing your hidden homeownership costs can be as simple as finding ways to bundle or condense your expenses: 

• Bundle your insurance: Consider bundling your home and auto insurance to receive a reduced rate from your insurance company. 
• Appeal your property taxes: If your property taxes seem too high, you can file an appeal to reassess the value of your home. 
• Learn to DIY: Handling your own lawn care and small home repairs can cut down on the cost of services that you pay for annually. 
• Steer clear of HOAs: Living in an HOA comes with many benefits, but that means additional fees. If you're looking at homes in the top of your price range, you might consider limiting your search to homes that are not part of an HOA. 
• Consider a home warranty: If you’re concerned with costly and unexpected expenses, a home warranty may provide some peace of mind.

A home is probably the largest investment you will make in your lifetime, and you’ll want to protect that investment if issues arise. Moreover, homeownership means that you need to be prepared for ongoing expenses and budget for future repairs. 

Making yourself aware of these costs and tackling them head-on can help reduce unneeded stress. With backup finances and a dedicated plan, your homeownership costs should be much easier to manage.