How Much Does Owning a Home Really Cost?

What is more exciting than embarking on the purchase of a home? In our world, there are few things better.

You’ve done the math, you’ve run the numbers, and you have honed in on a monthly mortgage payment amount that works for you. That’s great! But your mortgage payment is not the whole picture. If you want to enjoy the stress-free life in your new home, factor these costs into your big picture finances.

Property Taxes

Taxes are determined by your home value, the region in which you live, and local tax levies. These values are fluid and can vary significantly. Large upward or downward swings are rare, but can happen. Any big changes in your property taxes are usually spread out over time — you don’t necessarily need to be prepared with a lump sum to cover a sudden increase if you have a mortgage lender that pays your taxes out of an escrow account.

Homeowners Insurance

Insurance is a lot like property taxes in that your insurance rate is property-value-based and will vary over time. It is also similar to property taxes in that your lender will probably pay for your insurance out of your escrow account.

Expect your insurance premium to increase steadily from year to year as your home value increases and as the cost of goods/replacement cost increases over time. You have some control over your premium with the deductibles that you choose (higher deductibles=lower premiums, and vice-versa). You can always do some price checking with different carriers, just be sure any new quotes reflect the same coverage you already have so that you are truly comparing apples to apples.

Utilities

Utilities can be a very sneaky expense, especially if you purchase an older or less efficient home, or if you are moving into a larger home. Utilities may include: water, sewer, garbage, and internet. If you buy a home in the country, you will most likely have well or a septic tank. In this case, your expenses will be related to maintenance and repair of those systems rather than a monthly service cost.

Routine Maintenance

All of the features and systems that make your house a pleasant, comfortable place to live require upkeep. To own a home is to become a steward of your home’s roof, HVAC, landscaping, appliances, etc. Expect the annual cost of routine maintenance and repairs will be about 1-2% of your home’s value. Trust me on this: regular upkeep is much less expensive than letting things fall apart fixing it later.

Unexpected Repairs

No matter how well you maintain your home, sometimes things go awry. Here are real-life surprise repairs we have made over the years:

• We neglected to winterize the outside spigot so when David opened it up in the spring to pressure wash, it flooded inside the wall and into the kitchen.

• Our sewer line failed on Thanksgiving Day!

• An undetected break in our underground sprinkler system leaked xxx gallons of City water.

• Our furnace crapped out in the middle of a December cold spell.

I truly hope that you are luckier than us — but maybe set aside a little extra in an “uh-oh” fund just in case.

Lawn & Seasonal Expenses

Winter, spring, summer or fall — seasonal expenses include keeping the grass, irrigation, tree trimming/maintenance, snow removal, pest control, pool/hot tub maintenance, etc. and any tools, supplies, and equipment you need to complete these tasks if you are not hiring a service provider. The bigger your home and yard, the more expensive it will be to maintain.

The Good News?

Admittedly, it’s a lot to think about. Owning a home requires a lot of love and care, and I don’t blame anyone who opts to rent. But there is a reason people long to buy a home, several in fact:

• Build equity over time and with improvements

• Stability (no rent hikes or vacate notices)

• Freedom to completely personalize your space

• Potential long-term appreciation

• A home sweet home that is truly yours

And what’s better than that?