The Surprising Costs of Owning a Home

Here’s a sample home expenses list and how to save up for them.

In Part 4 of our 5-part series for first-time home buyers, we explain the costs of homeownership (including the hidden ones) and how they affect your money. Just joining in? Start here.

You’ve scrimped and saved up enough for a down payment on your home and feel confident you can make the monthly mortgage payment. You’re probably feeling proud of yourself—and you should. That’s a huge accomplishment.

But before you fully jump in to homeownership, whip out your calculator (again). It’s time to crunch some more numbers because the mortgage and down payment aren’t the only costs of owning a home. Planning ahead to ensure your savings can cover these costs can help prevent tracking up debt or needing to put everything on a credit card.

The home expenses you expect

These are the monthly bills you're likely prepared for:

  • You owe property taxes now. On average, Americans pay $3,300 in property taxes per year.1 As a renter, you may have been blissfully unaware that property taxes existed. Once your home search begins, they become quite apparent, as the property taxes in your target area can affect the home you can afford. Taxes vary by city, state and even county.

  • Homeowners insurance is a necessity. The bank won’t give a mortgage without homeowners insurance, which assesses the value of your home and belongings. The average cost of homeowners insurance tends to range between $300 and $1,000 annually.2 Many factors determine the cost of insurance, including how many items are included in the coverage and the location of the property. In the case of theft, fire and certain natural disasters, the insurance company will reimburse the amount your home and belongings were valued at. (However, homeowners insurance doesn’t cover losses that result from floods or earthquakes—you’ll need a separate insurance policy for those.)

  • You pay for your utilities. When you were renting, you had to cover bills for water, electricity, gas, internet and cable. Whether renting or owning, these bills remain your responsibility.

The bills that may catch you by surprise

These are the costs that tend to sneak up on first-time homeowners:

  • You may have a lot of home to furnish. Were you renting a small apartment or sharing furniture with parents or a roommate? You may suddenly realize that the comfy recliner you love to collapse into at the end of the day isn’t actually yours to take.

    Of course, buying furniture is one of the fun parts and helps put your stamp on your new home. Just be aware that the cost could make a dent in your savings. If you open a line of credit at the furniture store, these purchases can add to the list of bills to pay when owning a house.

  • You’ll have to buy (and fix) appliances. You’re probably thinking, “The house comes with appliances.” True, but they break. And it may happen sooner than you think. Veteran homeowners will tell you that the air conditioning unit that seemed to work perfectly during the home inspection or the walk-through suddenly breaks down shortly after move-in day. It’s uncanny. Hopefully, this won’t happen to you, but it’s a good idea to prepare for expenses like these. When you’re renting, you can call your landlord if the fridge stops working. As a homeowner, repairing or purchasing new appliances falls on your shoulders.

  • Home maintenance is inevitable. In general, the older the home, the more maintenance it needs. Luckily, foundation, framing, plumbing and wiring tend to last for at least 50 years.3 But parts of the home that are exposed to the elements, like the roof and siding, or mechanical systems (think the boiler, central air and electricity) may need to be replaced within 10 to 15 years.4

Don’t forget HOA fees

Another cost you may have to factor into your budget is a homeowners’ association (HOA) fee. Often, townhouses in planned communities or single-family homes in subdivisions are managed by an HOA.

HOA dues vary greatly, but on average, they range from $200 to $300 per month.5 In some cases, you can pay the fee in one lump sum per year. These costs cover neighborhood amenities like community pools, tennis courts, a clubhouse or other common areas.

Living in an HOA community also means having to abide by certain rules regarding the appearance of your home. These rules can preserve your home value, because they help ensure properties are well-kept. Having neighbors with neglected homes can bring down the property value of your home by as much as 5-10%.6 That means that a $200,000 home may be valued between $180,000-$190,000 because of other residents’ unkempt lawns or overgrown shrubbery. Although there are no shortcuts to saving on HOA dues, rest assured that your property value won’t be negatively impacted by neighbors.

How to save up for that hefty home expenses list

Although adding up all these costs and looking at the average cost of owning a house per month can be shocking, knowing that information before buying can help you prepare. Here are a few ways to plan ahead:

  • Consider an escrow mortgage: It combines insurance or property tax bills into your monthly mortgage payment, so you’ll pay a little toward both every month and avoid getting hit with large, unexpected bills.

  • Give yourself time to furnish your new home: Before you start buying furniture, decide much you feel comfortable spending. Check out Craigslist, consignment shops, estate sales, or wholesale retailers (like Costco), rather than typical furniture stores, to save money. Start with the rooms you’ll be spending the most time in, like the bedroom and living room. Furnish those areas, pay off the bills and then move on. Empty rooms mean more space for guests to mingle during the housewarming party, anyway.

  • Build up a home repair fund: Most experts recommend putting aside 1-3% of the purchase price of your house each year for repairs.7 So, for a $200,000 home, you’d want to stash between $2,000 and $6,000 per year.

  • Make saving a cinch: Set up an automatic savings plan so that a set amount of money is routinely moved into your savings account each month without any effort on your part. This way, you’ll have a stash set aside for any costs of owning a home that may pop up.

  • Slash your expenses: Ultimately, you may decide to make cuts in other areas or to buy a smaller home that requires less cash up front and a lower monthly mortgage bill.

With a plan that’s right for you, you may be able to afford all of these bills to pay when owning a house and still be able to spend money on—and enjoy—the other aspects of your life.

In the final installment of our First-Time Home Buyer’s Guide, you’ll learn what to expect from the moment your offer is accepted through move-in day—and the associated costs.


This site is for educational purposes. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

Citations

  1. Brinkley-Badgett, Constance. (2017, April 16). Comparing average property taxes for all 50 states and D.C. Retrieved September 17, 2017, from https://www.usatoday.com/story/money/personalfinance/2017/04/16/comparing-average-property-taxes-all-50-states-and-dc/100314754/

  2. Meggitt, Jane. What Is the Average Cost for Homeowners Insurance? (2018, June 11). Retrieved July 25, 2018, from https://homeguides.sfgate.com/average-cost-homeowners-insurance-3020.html

  3. Gibson, Scott. How long stuff lasts. (2017, April 11). Retrieved September 17, 2017, from https://www.thisoldhouse.com/ideas/how-long-stuff-lasts/

  4. When to replace your central air conditioning system. Petro Home Services, https://www.petro.com/cooling/when-to-replace-your-central-air-conditioning-system/

  5. Mandell, Lisa Johnson (2016, December 01). What are HOA fees? How these dues make homeownership easier than ever. Retrieved September 17, 2017, from https://www.realtor.com/advice/buy/what-are-hoa-fees/

  6. Bad neighbors can decrease property values. (2013, January 30). Retrieved October 21, 2017, from https://www.appraisalinstitute.org/bad-neighbors-can-reduce-property-values-appraisal-institute-warns/

  7. Petrie, Shannon. (2015, June 01). Owning a home: The monthly tally. Retrieved September 15, 2017, from https://www.hgtv.com/design/real-estate/annual-expenses-of-homeownership/

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