10 Hidden Costs of Owning a Home
Owning a home can be an exciting and rewarding experience, but it comes with a range of costs that can surprise even the most prepared home shoppers. While you might be ready for the mortgage payments, the hidden costs of owning a home can add up quickly and impact your budget.
According to one recent study, these under-the-surface expenses for a median-priced home valued at $436,291 can add up to $18,118 annually. That’s an additional $1,510 each month above and beyond normal mortgage payments. A CNBC report compares these costs to “buying a used car every year.”
In this post, we provide an overview of these often-overlooked expenses to give you a better idea of what to expect as you plan and save to buy a home.
1. Property taxes
Property taxes are a significant annual expense for homeowners. These taxes are based on the assessed value of your property and can vary widely depending on your location. On average, property taxes can range from $1,000 to over $9,000 per year, with some states like New Jersey and Illinois having the highest rates. Some states with the lowest property tax rates include Hawaii and Alabama. A local real estate agent can give you a ballpark estimate of what you might pay in taxes on a house in your desired market.
2. Homeowners insurance
The average annual cost of homeowners insurance in the U.S. is around $2,728, or about $227 per month. What you pay will vary based on based on factors like the location of your home, its size and age, and the coverage limits you choose.
You’ll need to budget more for home insurance in Disaster-prone states like Florida, Louisiana, and Oklahoma. For example, some homeowners in South Florida are paying an extra $500 a month in insurance costs. Because of the increasing risk to insurance companies, homeowners nationwide are expected to see a 6% increase in average premiums before the end of the year.
Ask your agent about homes for sale that might have more affordable insurance rates or features that qualify for discounts, and shop around for the best rates and policies to keep your expenses manageable.
3. Home maintenance costs
Regular home maintenance is necessary to keep your property in good condition and prevent costly repairs down the line. These costs can include routine tasks like cleaning gutters, servicing HVAC systems, painting, and maintaining the landscaping. On average, homeowners should budget around 1% to 4% of their home’s purchase price annually for maintenance. For a median-priced $436,000 home, this means setting aside $4,360 to $17,440 each year for upkeep — or a minimum of $363 per month. You may not always need these funds, but they play a key role in maintaining your investment.
4. Utility costs (electricity, gas, internet, cable)
All combined, Americans pay an average of around $429 per month for their utility bills, according to Forbes. These costs can be higher in larger homes, regions with extreme weather conditions, or areas with limited utility options. For example, homeowners in Hawaii pay the highest monthly energy bill ($177.78), and homeowners in Utah pay the lowest ($80.87).
Implementing energy-efficient practices and appliances can help reduce your utility expenses, but it’s important to be prepared for this ongoing cost as part of your homeownership budget.
