12 hidden costs of owning a home every first-time buyer should know

April 8, 2021

For many people, owning a home is a key part of achieving the American dream. Homeownership offers the opportunity to build wealth and access credit through home equity, the possibility to reduce housing costs through mortgage interest deduction and long-term housing security.

But homeownership is dang expensive.

Depending on the type of loan you qualify for, you’ll probably have to save 3% to 20% of the home’s purchase price for a down payment. You also have to pay for closing costs, which can amount to 2% to 5% of the total loan cost.

And you have to factor in all the things your landlord covered, like the repairs for the water heater that time it suddenly went out in January or (gulp) maintaining the appliances, gutters and landscaping to prevent costly replacements or angry letters from your homeowner’s association.

When you’re getting ready to buy your first home and you only account for the down payment, closing costs and monthly mortgage payment, you may be in for some unpleasant surprises about the hidden costs of owning a home.

But not to worry. Before this happens, you can learn about other costs you might be in for and start preparing for those now. You’ll be happy you did.

1. Homeowner’s insurance

If you’ve been renting, you probably have renter’s insurance that covers your personal belongings, liabilities and cost-of-living expenses if there’s a loss to the residence you’re renting. What the renter’s insurance policy doesn’t cover is the structure itself.

When you own your own property, homeowner’s insurance insures all the things that renter’s insurance does, but it also insures the home from losses and damage caused by storms, fire and in some cases, vandalism. Homeowner’s insurance policies vary greatly in cost and coverage, so make sure to read the fine print.

The cost of homeowner’s insurance is usually built into the monthly mortgage payment, and the national average cost is $136 per month. This cost varies widely by state, so check average costs in your state to get the most accurate number.

2. Property taxes

In addition to homeowner’s insurance, you’ll pay property taxes on your home. Property tax is calculated by your local government and is usually based on the value of the home itself and the land it sits on. Property taxes fund local education, law enforcement, fire protection, road maintenance, water and sewer maintenance, libraries and other community services.

Like homeowner’s insurance, the cost of property tax is usually built into your mortgage payment, but it varies widely by state and even by neighborhood. You can check your county assessor website to see property tax rates for homes you’re looking at, but keep in mind that property taxes could increase each year depending on your location.

3. Private mortgage insurance (PMI)

Your monthly mortgage payment will include the principal and interest on your loan, insurance payments and the monthly cost of property taxes. If you put down less than 20% on your home, that monthly payment will include one final expense: private mortgage insurance (PMI).

Because you’re not investing 20% of the purchase price into your new home, lenders require you to pay PMI so they’re protected from the possibility that you default. Homeowners pay PMI until they reach 20% equity in their home, and the cost averages around 0.5% to 1.5% of the loan amount on an annual basis.

4. Homeowner’s Association (HOA) fees

You may also be in for a monthly HOA fee, which is not included in your mortgage payment. HOA fees fund the maintenance of neighborhood common areas and the enforcement of HOA bylaws, which state requirements that homeowners must comply with to keep the neighborhood looking clean. These can include paint color restrictions or types of fences you’re allowed to install.

A clean, uniform neighborhood often results in greater property value, which will benefit you when you’re ready to sell the home. As with everything, HOA fees vary drastically. You can probably expect to pay around $100 to $300 a month if purchasing a home in a neighborhood with an HOA.

5. Utilities

If you were renting an apartment and are now thinking about purchasing a larger property, your utility bills may go up. It costs more to heat and cool a larger structure and you may have more rooms with lights on than you did before.

6. Furniture & decorations

With more space, you’ll need more stuff to fill that space. Furniture and decor shopping is fun, so prepare yourself to fight shopper’s temptation when you first move into your new home. With that in mind, remember to take your time designing and organizing this new space – it doesn’t have to happen all at once.

(And you’ll want to save your money for some of the possible emergencies we describe below.)

7. Aesthetic maintenance

When you move into your new neighborhood, you definitely don’t want to be the ugly house on the block. If you’ll be living in a single-family home, you may need to pay for monthly lawn care or landscaping services. If you plan to do this yourself, you’ll need a mower, a trimmer and other tools you probably didn’t need in an apartment. You’ll also need to update your home every 5-10 years with a fresh coat of paint, which can cost a few thousand dollars.

8. Flooring & painting

You may want to do some aesthetic work on the inside as well. Did the previous owner leave you with bright, traffic-cone-orange walls in the master bath? You’ll probably want to repaint.

(Or maybe you’re the person who paints bathroom walls orange. Hey, we don’t judge!)

You might also have to replace the flooring. Even high-quality carpet is only likely to last for 8 to 10 years. Other types of flooring last longer, but could still be damaged over the course of normal wear and tear.

9. Appliances, furnace & AC unit

No appliance lasts forever, even if you properly maintain your appliances on an annual basis (another cost to factor in). Appliances we simply can’t live without include hot water heaters, refrigerators, dishwashers, washers and dryers, furnaces and air conditioning units.

According to the National Association of Home Builders, you shouldn’t expect your dishwasher or washing machine to make it past 9-10 years, while your dryer and stovetop range might last for 13 to 15 years. Appliances like those probably only cost a few hundred dollars to replace, but replacing or updating furnaces and AC units can easily cost thousands.

10. Plumbing

Gone will be the days when you could call your landlord or property manager to complain about a leaky faucet. Now that leaky faucet is your leaky faucet. You can learn how to fix it (a great life skill!)– or pay someone else to fix it. No matter how handy you are, unless you’re a professional plumber, you’ll probably need to pay for some expert help at some point as a homeowner.

11. Roof

Roofs are also not meant to last forever, especially in areas that experience extreme weather like heavy snowfall or hailstorms. Depending on the type of roof you have, your roof may need to be replaced every 15 to 30 years. Roof replacements are expensive. On average, homeowners spend nearly $8,000 on roof replacements.

12. Mold, termites, dry rot, oh my!

A good home inspector should be able to identify these problems before you purchase a house. But mold, termites and dry rot are savvy hiders and can cause serious health issues or lead to major structural damage if not dealt with appropriately. To prevent these problems, take care of all leaks and other exposures to moisture or rotting wood piles as soon as you notice them.

Breathe, and prepare for the hidden costs of homeownership as best you can

We know an article like this can add anxiety to an already apprehensive first-time homebuyer. But it’s unlikely that all or most of these occurrences will hit you at once, and we still believe that the advantages of owning your own home outweigh the disadvantages. Knowing about these extra costs and preparing as best you can – saving toward an emergency fund, for instance – will help you deal with these things as they come up.

In addition to an emergency fund, having enough credit is a good last resort if you’re unable to come up with the cash for a necessary repair. But when you’re saving for a house, it’s important to make decisions that don’t negatively impact your credit, so we definitely don’t recommend opening a bunch of new credit accounts.

Instead, focus on improving your creditworthiness with a solution like Loqbox. We help you build positive credit history and save money at the same time, so while you’re improving your credit score to give you access to better credit options, you can also get started on your emergency fund. Learn more about how a Loqbox account works here.

Loqbox is no longer available in your state. If you're an existing member you can still access Loqbox here.