The Real Costs of Owning a Home Can Exceed $14K a Year

The best time to get a clear sense of the costs involved in homeownership is before you start looking. The “hidden costs” of owning a home can add up to over $14,000 annually for the average homeowner in the U.S., and even more in expensive cities like San Francisco and New York, where it can exceed $22,000.

These costs—around $1,180 per month on average—include utility bills, homeowners insurance, and maintenance. While most prospective buyers are familiar with major expenses like mortgage payments and property taxes, it’s important to account for smaller costs too. Knowing them ahead of time can help prevent financial surprises.

What are the costs of owning a home?

Understanding all the costs involved in homeownership can impact both your budget and the type of home you choose. While a big yard or larger home may seem appealing, it’s essential to factor in the ongoing maintenance costs. Some buyers may opt for more affordable alternatives, like smaller homes or newer constructions that require less upkeep.

The total costs of homeownership include purchase costs, ongoing fixed expenses, and maintenance. Common ongoing costs are:

• Mortgage payments (principal and interest)
• Property taxes
• Insurance
• HOA fees (if applicable)
• Utilities
• Maintenance

In high-cost cities like San Francisco, New York, and Los Angeles, these “hidden” costs can top $22,000 annually. In more affordable locations like Las Vegas or St. Louis, they can range between $9,800 and $11,800.

Factors affecting homeownership costs

Besides your location, factors like the age of the home, its condition, and local contractor costs can make homeownership more or less expensive. Other considerations include the materials used in construction, home warranties, and ongoing fixed costs like:

• Monthly mortgage payments: For example, with a 10% down payment on a $350,000 home and a 30-year fixed-rate mortgage at 7%, your monthly mortgage payment could be around $2,251, including private mortgage insurance.
• Property taxes: These vary based on location and home value. Homeowners nationwide pay an average of $2,827 annually in property taxes.
• Homeowners insurance: Typically, homeowners spend about 0.5% of their home’s value annually on insurance, which averages $146 per month for a $350,000 home.

Maintenance costs of owning a home

Regular maintenance is crucial to keeping your home in good condition and avoiding unexpected repair costs. On average, home maintenance and upkeep can cost about $6,413 annually. These costs vary depending on factors like whether you have a yard, the size of the home, and whether you need to hire professionals for tasks such as:

• Gutter cleaning
• Lawn care
• HVAC maintenance
• Roof upkeep

Utilities, such as water, electricity, and garbage collection, can also add to your monthly expenses. For example, homeowners in Hartford, Connecticut, pay some of the highest utility bills, averaging $4,443 annually.

How to prepare for hidden costs

• Get a home inspection: A thorough inspection will give you an idea of potential repair costs and allow you to plan accordingly.
• Set up an emergency fund: It’s wise to save 1-2% of your home’s value each year for unexpected repairs.
• Plan for improvements: Identify what needs immediate attention and what can wait, and be realistic about what you can do yourself.
• Consider a home warranty: A warranty can cover some repair costs during the first year of ownership, providing peace of mind.

By considering all these factors upfront, you’ll have a better understanding of the true costs of homeownership and can make a more informed decision about whether a home fits your budget.