Hidden Costs Of Home Ownership

I am constantly reading articles about saving money.  I have seen many, many individuals talk about renting as just throwing away money that could go towards paying for the renter’s own house.  As a landlord, I might be slightly biased about renting, however, there are some significant hidden costs to home ownership that many people forget about.

Before you get excited by commercials or advertisements that say that you can own a home for the same amount as the rent that you pay, remember these additional costs of home ownership.

  • Utilities
    If you live in an apartment that includes utilities, you might be shocked by just the utility costs.  This includes not just your electric and water bill but might include a gas, sewer garbage and/or recycling bills as well.  This all depends on where you live, of course.
  • Homeowner’s Insurance
    This is one you certainly never pay as a renter.  Renter’s insurance is incredibly cheap, but homeowner’s insurance can be ten times the cost.  If you think that you can get away with not paying for homeowner’s insurance, beware that your mortgage company most likely requires you to keep one.  If you don’t have a policy, they may purchase one on your behalf and pass the costs on to you.
  • Furnishings
    A house might mean additional furnishing, especially if you move from a small apartment into a house.  There is a huge temptation to purchase all new furnishings immediately, but, waiting until you’ve adjusted to paying for the your new home is probably a better idea.
  • Maintenance & Repairs
    When things break at your apartment, you pick up the phone and tell your property manager or landlord so that they can handle the problem.  Guess what? You’re the landlord now.  if anything breaks, and they will, you must either pay to fix it, or break out your handyman skills.  You’re also now responsible for the yard maintenance, gutter cleaning, and snow removal.  Cheap people like me get out there and push the lawn mower (also another expense) to save money.
  • Property Tax
    Depending on where you live, the property taxes can be the equivalent of a few months’ mortgage payment.  Just when you get used to paying the property tax, they’ll increase it.  The property tax on one of my rental homes increased by 25% in just one year.  Typically, things like that won’t happen unless you have crooked politicians in office who are lining their pockets with your hard-earned cash, but, be aware that increases are normal.
  • Homeowner’s Association/Condo/Co-op Fees
    This is why I will not buy property in a sub-development, condo, or co-op.  These fees can be hundreds of dollars each month, and I guarantee that they never decrease.  You might be able to pay your mortgage, but if these fees increase significantly, you can lose your home because you have not paid these fees.

The next time that you see a commercial saying that you can own a home for the same amount that you are currently paying on rent, think again.  These hidden costs of home ownership can derail your plans of owning your own home.

The fees listed above are just some of the fees that you might incur.  I did not discuss possible private mortgage insurance if your down payment is below 20% of the home’s value and supplemental insurance such as flood that might be necessary depending on where you live.

Have you purchased a home and found it to be more expensive than you initially thought?  Share in the comments.

Join the newsletter

Subscribe to get our latest content by email.

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit
Related Posts Plugin for WordPress, Blogger...

18 thoughts on “Hidden Costs Of Home Ownership

  • I suppose home ownership is not all that its touted to be, especially when you consider the hidden costs such as property taxes and insurance. Well, some can be reduced/cut back such as utilities and one can always go minimal on the furnshings. At the end of the day, when you consider the sheer costs of renting for over 30 years, that mortgage starts to look pretty attractive and you are willing to stake a claim on your own home!

    • There is a HUGE cost to renting over 30 years for sure. But if you add, say a 20% premium on top of rent, that might get you closer to home ownership costs. A lot of people just can’t make that extra 20% payment comfortably. I know a ton of people who rent now and will for their entire lives. I know for sure that I most likely than not will never own a home where I live in New York City. It’s just too expensive here. Now if I moved to the midwest…

  • There are certainly a lot of benefits to home ownership but you do need to be aware of the costs. There always seems to be something else that comes up that you have to dish out money for. Your mortgage might stay the same but like you say, property taxes and such can kill you depending on where you live. But it also depends on where you live too and what you get out of it.

    I think one way buying for the price of renting works is if you are moving to a different area where house prices are different. We pay more for our home than we did for our apartment but it’s not a huge difference. We moved from NYC to Nassau. A house would have easily cost us at least tens of thousands more if not worse in NYC.

  • Curious, can you fight a property tax increase like that? Or are you stuck with it? I’m sure you still have to pay an increase but it would be nice if it didn’t increase as much!

    I hear Colorado has some of the lowest property taxes (for an area with weather I like) and so that’s one of my dream places to move to, but I don’t know the likelihood of that anytime soon.

    • You can fight your assessment, but not the property tax rate increase itself. Residents can also vote down their local school budget, but that’s generally not a good idea.

      Colorado does have very low tax rates. However, property values are relatively high… so you’ll pay more for the house but less on taxes. Western New York State is the exact opposite: home prices are generally very low, but property taxes can cost almost as much as your mortgage.

    • Sarah hit it right on the head. You can fight the assessment which is how much they value your land and property but not the rate itself. The house is cheap but the tax is relative HIGH. Taxes amount to three months of the house’s cost. It’s kind of nuts.

      • You think that’s nuts? I’m not exaggerating when I say that some homeowners in this area pay more than the cost of their mortgage in property taxes each month.

        Thankfully, we are not one of them… but we still pay an absurd amount of property taxes relative to the value of our home. ($3,800 per year for a $120k home)

        Our only consolation is knowing that the majority of the taxes we pay go directly to the local school district, which is one of the best in the state.

  • Because I’ve ever owned a house, I never realized all the extra expenses that come with owning! This was a very informative article that I will have to keep in mind when I am debating owning/renting in the future.

    • PMI or private mortgage insurance is an added fee that can be hundreds of dollars that you pay in addition to your mortgage when you do not have a down payment of at least 20%. It’s brutal, but totally avoidable.

  • My husband and I purchased a home this past May. He has experience with property ownership and we ended up getting a condo with HOA fees.

    It was cheaper than rentimg something similar in the same area, even with the HOA fees, and having landscaping, garbage & recycling, snow removal, structural and exterior building maintenance covered is a big plus. We have already had to spend some money on HVAC cleaning and our diswasher just stopped working.

    The cost of owning a home is definitely more than the mortgage payment.

  • I would also add “interest” to this list. It’s one of the biggest expenses if people finance over a 30 year period. It essentially doubles the purchase price (in some cases more.) So that $150k home will end up being $300k! This is why we chose to get a home with no mortgage. We live in a very urban area (the hood) but I couldn’t imagine paying so much $$$ to a bank for interest. I know other people in this area who bought cash so they could avoid financing a home. When you factor Interest, maintenance, taxes , etc a home turns out to be a very poor investment ( unless you buy cash or finance for just few years.)

  • Unless you’re aggressively paying down your mortgage each month, I feel that over a 30 year span you are better off renting.

    By the time you add home repair, taxes, HOA fees, insurance, higher cost in utilities, and pay %4 interest, it doesn’t seem worth it.

    I purchased my first home as a rehab and am selling it 1 year later for a small profit. If you can do this then buying a home can be a good investment.

    Not to mention the realtor fees and closing costs of buying and selling a home

  • I’m in the renting camp. I’ve grappled with renting vs. buying for my own situation, and renting always wins the battle. I just don’t want to deal with the responsibility of maintaining a home and I don’t want to pay HOA fees in a condo.

  • Partly based on my broker’s recommendation for the tax benefits, I bought a relatively inexpensive 3-bedroom house as a divorced, childless woman nearing retirement (lived in two previous homes as a married woman in my 30s). I put down slightly more than 20% so the mortgage would be much less than most 2-bedroom apartments in the area. HOWEVER, I have huge buyer’s remorse! When you become a homeowner, you’re suddenly on the radar of every tax collector known to man! Today, for instance, I received a notice from the county that the annual “Backflow Prevention Assembly Test” for an in-ground irrigation system was due. In addition to paying utility bills (taxed again), property taxes (also on cars), maintenance costs, updates and renovations (so you can sell down the road), for furnishings (even buying used/consignment), lawn care and equipment, etc., etc., etc., a house is a constant drain of time, energy, and focus. I plan to stay 5 years at most and then hopefully I can sell and make a small profit or at least come out even, then downsize to a maintenance-free condo on the water!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.