The True Cost of Homeownership

12 Oct
Homeownership Cost and Home Buying Tips

It’s not all upside when it comes to homeownership and there can be a number of expenses that crop up at closing and over the years that you may not have expected.

Homeownership comes with a variety of advantages. You are investing in a property and gaining equity instead of forking over rent to a landlord every month, you have a house you can call your own as well as a pretty nice tax deduction every year.

However, it’s not all upside when it comes to homeownership and there can be a number of expenses that crop up at closing and over the years that you may not have expected. The down payment and monthly mortgage payment are just one factor of buying a home, there can also be a number of expenses that come as a surprise after you sign on the dotted line.

Let’s have a quick look at a number of additional expenses related to owning a home:

Property Taxes

One of the biggest expenses you will incur with a home is property taxes. The property tax rate varies by state and county so make sure you have a complete understanding of your rate before purchasing a home.

It is also important to note which way property values are going as they have a major impact on property taxes. If home values are rising across the area you are considering, there is a good chance that property taxes will be headed up as well. While rising home prices means that you will be gaining equity in your home faster, it also means a bigger tax bill.

Fully investigate the tax rates in your particular area to make sure you can afford your yearly tax bill before putting an offer in on a home.

Homeowners Insurance

This is another major expense that new homeowners may not be aware of but is an absolute requirement. Unless you are paying for your home in cash and can easily afford to rebuild it if it is destroyed, you will need homeowners insurance.

A homeowner policy will pay to repair or rebuild your home if it is damaged by a covered peril such as a hurricane or tornado. Your possessions are also covered. If you have a mortgage on your home, the lender will require that you carry the appropriate amount of homeowners coverage.

The cost of homeowners insurance will vary depending on a number of factors. Everything from the materials your home is built out of, its location and even the distance to the nearest fire station all impact your premium.

You should absolutely gather some homeowners insurance quotes for any home you are seriously considering so there are no surprises when you get to closing. This is especially true if the home is located on the coast or in a floodplain, in a forest or an earthquake prone area.

A standard homeowners policy does not cover flood or earthquake damage so if you live in a flood or earthquake prone area you will need a separate policy to cover the additional risks. These additional policies can be fairly expensive and will dramatically increase your insurance costs.

Always get at least three homeowners insurance quotes before putting an offer in on a home so you are well aware of the cost to protect your new home.

Repair and Maintenance

When you own your own home you can no longer call the landlord anytime something goes wrong. Repair and maintenance now falls to you and while some of it is pretty easy to do on your own, other repairs can be quite pricey.

Before putting an offer in on a house check the age and condition of the roof, foundation, mechanical systems and any other expensive systems that may need to be replaced in the near future. If you run across anything that is in need of repair or replacement factor these costs into your offer.

Once you own a home you should establish a fund to help cover the cost of any major repairs you will need to make down the road. Luckily, in most cases, you will not experience a major expense every year so your fund can also be used to pay for smaller upgrades to your home.

While there is no way to predict the exact cost of these types of repairs, you should avoid purchasing a home that will leave you house poor without the resources to make needed repairs or updates.

Outside Maintenance

If you have never owned a home before, you may need to make some big purchases once you move in to your new home. Consider the cost of a lawnmower or tractor depending on the size of your yard. A number of other gardening tools will also be necessary and those costs can quickly add up.

You may also need a snow shovel or snow blower if you have a long sidewalk. In almost all communities, clearing your sidewalk is mandatory and that job now falls to you so make sure you have the proper tools for the job before the snow starts flying.

While costs will vary depending on your needs expect to spend between $500 and $2,000 on outside maintenance equipment.

HOA Fees

Many communities now have HOA or Homeowner Association Fees that must be paid by each homeowner. This is especially true if you are buying a home in a new build area or are buying a condo. In most cases, HOA fees are mandatory.

Depending on the HOA, these fees may cover neighborhood costs such as garbage collection, snow removal and upkeep of common areas and neighborhood parks. They may also cover the cost of neighborhood block parties or movie in the park nights.

If you are shopping for a home in an HOA neighborhood be sure you fully understand what the fees cover as well as how much you will owe on a monthly basis. Read the HOA bylaws as well. In most cases theses fees are not optional and the HOA can legally put a lien on your home if do not pay the monthly HOA fee.

It is also important to remember that HOAs can legally require certain upkeep of your home, including painting your house. This can be a costly maintenance issue so be sure to fully understand the power of the HOA in any neighborhoods you are considering.


Homeownership means that utilities are no longer included in your rent so you must budget for these expenses. Ask to see monthly bills for utilities before making an offer on a home to make sure that you understand the monthly costs of operating your new home. Remember to ask for twelve months of bills to examine as some utility costs such as heating and air conditioning will spike during summer and winter.

You will also need to check on the costs of cable, garbage collection and Internet to get a full picture of your monthly costs.

Furniture, Appliances and Upgrades

When shopping for a home be sure to budget some money for new furniture, appliances if necessary as well as upgrades that you will want to do immediately. While most homes come with at least some appliances, new builds may not include appliances and in some cases the previous owner takes them with them so be sure to factor these costs into your budget.

Furniture is something else that you may need immediately, especially if you are moving from a small apartment to a much bigger house. Determine your furniture needs and do a bit of shopping to get an idea of how much money you will need to furnish your new home.

Finally, when purchasing a new home there will most likely be a few upgrades or repairs you will want to do immediately. Whether it’s something simple like painting or something more expensive like adding a deck, budget a few dollars towards upgrades and repairs. Get a quote before putting in an offer to determine how much the repairs or upgrades will cost.

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