Homeownership: More Than a Mortgage

NEW YORK – You know the basic costs that go along with homebuying, but what about the hidden costs of homeownership — all the less obvious expenses beyond your mortgage that can really add up?

If you're in the process of calculating how much home you can afford, you might need to rework your budget. Affordability is one of the biggest challenges first-time homebuyers face, and less obvious expenses can have you paying a lot more money each month in addition to your expected mortgage payment. If you fail to take into account ancillary expenses when buying a home, you could be paying more than you can afford.

The average annual cost of owning and maintaining a single-family home in the U.S. is $18,118 a year, or an additional $1,510 per month on top of a mortgage payment, according to a recent study from Bankrate. That's 26% higher than it was four years ago. Homeowners spent an average of $14,000 on hidden expenses in 2023, according to a Zillow study, an additional $1,180 per month.

Clearly, there's a lot more to consider when buying a home beyond its sticker price and mortgage rate. Utility costs, property taxes, insurance and home maintenance can tack on a hefty bill each month.

"While homeowners are typically aware they'll have to pay for utilities every month, these other costs not directly related to purchasing the home itself can easily slip from one's mind," said Claudia Phillips, who works with This Old House Reviews. "When purchasing a home, buyers should outline these costs ahead of time to make sure they can budget on a monthly or annual basis. These expenses will vary depending on a home's age, location, material and construction. Homeowners should consider purchasing a home warranty policy to off set these costs, which can reach an average of $600 annually."

Here's a look at some of the most common hidden expenses you should anticipate and plan for:

1. Closing costs

These are the fees you'll pay when finalizing your home purchase. Typically, this will cost between 2% to 5% of the home's purchase price. For a $300,000 home, this works out to a range of $6,000 to $15,000 in closing costs alone.

2.  Home inspection

Before buying a home, it's a good idea to get a home inspection. If not, you could end up paying thousands of dollars in repairs later on down the road due to defects in the house's structure. However, a home inspection will set you back $342 on average, according to Angi.

3. Moving costs

After buying a house comes packing up and moving. The average cost to move a three-bedroom home locally is $2,200, according to Forbes. A long-distance move for a home that size? $4,400 on average.

4. Homeowners insurance

How much you'll pay for insurance depends on factors such as location, credit history, size of the home and level of coverage needed. Insurance rates can also vary widely between cities, so it's important to consider these costs when determining how much home you can afford. On average, homeowners’ insurance costs $2,230 per year for a policy covering $300,000, reports Bankrate.

5. Property taxes

Another important cost to remember – property taxes. As a homeowner, you'll need to make sure to budget for this ongoing expense. And property taxes "will continue to rise rather than drop" in most instances, according to Citizens Bank.

6. New furnishings

Don't forget about the added cost of new furnishings, especially if you're moving into a larger home. The average cost to furnish a three-bedroom house is $10,000 to $40,000 with moderately priced furnishings, according to Home Guide, while the average cost to furnish a four-bedroom home is $15,000 to $60,000.

7. Repairs and maintenance

Standard home repairs and routine maintenance, like pest control, lawn care, trash fees, roof maintenance, plumbing repairs, appliance replacement, heating costs and cleaning expenses, all add up.

8. HOA fees

There's a good chance the home you're buying is part of either a homeowner's association (HOA) or condo association. If so, you'll need to budget for the fees (charged monthly, quarterly or semi-annually), which covers the cost of maintaining common areas and amenities in the community.

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