The Hidden Costs of Owning a Home

For most Americans, the idea of pursuing the good life still includes buying a home.

Many Americans would consider home ownership a more significant milestone than being able to retire, having a successful career, or even having children. Aside from the sense of stability and community a home provides, ownership has a host of financial benefits. Mortgage payments, for example, contribute to building equity, which increases your net worth.

But on the downside, the cost of owning a home has increased dramatically in recent years. Insurance, property taxes, repairs, and the other “hidden” costs that come after buying have increased by 26% since 2020.

Unfortunately, these are the costs that tend to take new homeowners by surprise. Whether you’re settling into your new home or still searching for your dream house, learning more about these unexpected expenses will give you a leg up in managing them.

Below is a complete guide to the various costs of owning a home, including some essential information that will help you contain and even reduce them.

The Price of Home Ownership: Upfront Costs

Shopping for homes is fun, but the number-crunching and paperwork that surrounds it… not so much. Still, finding a mortgage lender, applying for pre-approval, and closing on a home are all important steps in the home-buying process.

These are the costs most people think about when buying a new home, often called “upfront” costs.

These so-called upfront costs include:

Down payments. This is a portion of the total purchase price that a buyer usually pays in cash before the sale, effectively reducing the amount of the mortgage loan.

The national down payment average in 2024 is 14.4% of a home’s purchase price, but the actual amount you’ll pay will vary depending on your finances and the type of loan you’re getting. Buyers in the northwest and midwestern states have seen the greatest increase in down payments in recent years.

Closing costs: These are the costs associated with securing a loan. It’s a mixed bag of charges, often including:

• Attorney services
• Application fees
• Home appraisals
• Title searches, and more

These closing costs often range from 2% to 6% of the loan amount, representing another significant expense. To offset, you can negotiate to lower them or look into some of the available assistance programs for financial help.

Moving costs: The amount you’ll pay to get your belongings from one home to the next depends on how far you’re moving, which city you’re moving to, and whether you’re hiring professional movers. Professional movers could charge as much as $6,900 for an in-town move and $14,000 for a long-distance move—and don’t forget a tip of 15-25%!

Extra costs: It’s smart to budget for miscellaneous expenses along the way, such as additional inspections for completed repairs, service setup costs for utilities and cable, professional cleaning, and more.

Upfront costs can sometimes run higher than expected. For some homeowners, the greater financial challenge begins after the purchase.

Everything Else: Property Taxes, HOA, and Other Ongoing Expenses

Finally, getting those house keys means you can put many of the upfront expenses in the rear view mirror. But now, it’s time to look ahead.

Owning a home comes with a whole host of other financial obligations that continue for as long as you reside there. Let’s look at some of these hidden homeownership costs—and the impact they might have on your wallet—in more detail.

1. Monthly Mortgage

The average estimated monthly payment for a home is close to $3,500. For some buyers, this includes property taxes and mortgage insurance in addition to the principal amount of the loan and interest.

Note, your mortgage will vary greatly by loan amount, length of term, and interest rate.

2. Property Taxes

As a homeowner, you’re responsible for paying state and local property taxes annually. The amount you’ll pay depends on your local tax rate as well as your home’s assessed value.

For example, the effective property tax rate is 1.79% in Texas, 0.78% in California, and 1.62% in New York.

You can expect both tax rates and home values to fluctuate—unfortunately, that means you can’t expect to pay the same amount consistently year after year, unless you qualify for a property tax freeze or your state or county freezes your property taxes for a certain period.

Your local government will periodically assess your home’s value for property tax purposes. Some localities hire appraisers to canvass neighborhoods and inspect properties while others—usually those that have a very large number of properties—use mass appraisal methods to determine valuations. If your property value changes in any given year, your local tax authority will notify you via mail.

If you have a mortgage, your lender will estimate your yearly property taxes, divide them by 12, and will often bundle that amount into your monthly mortgage payment. If the actual amount is more or less than what you paid, you’ll either be on the hook for the additional cost or get money back. If, on the other hand, you own your home outright, you’ll simply receive a property tax bill in the mail once a year; it’s then your responsibility to pay it on time.

With property taxes continuing to increase across most of the nation, it’s smart to keep an eye on your home valuations. If you don’t agree with an assessor’s valuation, you can always protest in an effort to lower your tax bill.

Using a property tax protest service like Ownwell makes protesting especially easy. We handle the forms, deadlines, and negotiations for you—all you have to do is answer a few short questions first. Even better, you don’t pay unless we win!

Eighty-six percent of our customers receive a reduction in taxes, saving $1,148 on average. That’s money you can apply to any of the other monthly costs (or anything else!).

3. Mortgage Insurance

If your down payment was less than 20% of the home’s purchase price, you’ll need to pay for mortgage insurance. Mortgage insurance protects lenders, who would experience a loss if you miss a monthly payment. Conventional loan borrowers get what’s known as private mortgage insurance (PMI).

Count on the cost of PMI ranging anywhere from 0.22% to 2.25% of your loan. This charge is usually included in your mortgage payment, but you could also choose to pay a single premium up front or agree to a higher loan interest rate to (indirectly) cover the cost of insurance. Note that the amount will decrease proportionally in relation to your loan amount over time.

4. Renovations

Even if you don’t buy a fixer-upper, renovations of some type might be necessary or desirable. Finding a dream home that matches your expectations exactly is rare) In fact, as many as 60% of newly bought homes are renovated in one way or another, typically within the first three years of purchase.

But be prepared: the cost of renovations is climbing. Thanks to the high cost of labor and materials, you could pay anywhere from $14,600 to $41,498 for a kitchen remodel (one of the most popular types) and $13,500 for a main bathroom redo. Even small projects can be costly.

5. Repairs

Homes of all ages need continuous maintenance. Some projects are simple and low-cost, like the occasional deep cleaning. But others, like installing a new roof, can be both expensive and time-sensitive. Be aware that delaying certain types of repairs, like roof and gutter issues or faulty electrical wiring, could be dangerous and cause even more problems down the road.

Some of the current average costs associated with common home repairs are:

• Cooling/HVAC system: repairs, $130 to $2,000; replacement, $6,775 to $12,130
• Water heaters: $3,550
• Foundation: $2,000 to $7,500
• Roof replacement: $150 to $6,000+
• Lawn and landscaping: $3,380 to $7,020 (annual cost for weekly service)
• Decks: $2,019

6. HOA Fees

If your home is located in a community with a homeowners association (HOA), you’ll need to factor HOA fees into your budget. Paid either monthly or annually, HOA fees support the upkeep of the community’s shared services and amenities—anything from pool maintenance and security features to lawn care, trash service, and sometimes even utilities.

Living in this type of community has its benefits, but it also comes with a host of rules and regulations around home remodeling, renting, and more.

California, Texas, and Florida have the highest number of homeowners associations, though there are HOAs in every state. They tend to be less popular in the midwest and southern regions of the U.S. The national average monthly fee is $390, or $4,700 annually.

The amount you’ll pay will depend on the amenities included, the number of homes in the community, total operating expenses, and more. If possible, read the HOA’s governing documents carefully when shopping for homes.

7. Utilities

Electricity, gas, water/sewage, trash collection—all are essential services needed to keep your home up and running. Municipalities vary in the way they handle these costs; sometimes one or more of them, like waste removal, for instance, is bundled into your property taxes. More than likely, however, you’ll be paying separate monthly bills for each of these utilities.

These service costs will also vary greatly based on location, your usage, and the season. For instance, many warm-climate places charge much more for electricity in the spring and summer months, and vice versa for historically cooler areas.

Also included under this umbrella are cable, internet, and phone service. On average, homeowners pay $6,888 per year for utilities, with cell phone service and electricity being the most expensive items.

Ownwell can help homeowners reduce their bills. On average 81% of our customers save money and average $238 in bill savings!

8. Homeowners Insurance

Different from mortgage insurance, homeowners insurance protects your home should it be damaged or destroyed by fire, heavy rain, or a natural disaster. Depending on what part of the country you live in, you may need additional insurance to protect against floods or earthquakes. You can also usually insure your possessions as part of your policy, which is useful in case of theft.

Homeowners insurance is required by most banks if you have a mortgage. They want to protect their investment, too.

Even if you’ve paid off your mortgage, it’s smart to have coverage. The current average cost of homeowners insurance is $1,915 a year, though it continues to rise. Many Americans struggle to make this payment, so plan ahead!

9. Miscellaneous Costs

Not every expense falls neatly into one of the above buckets, but that doesn’t mean you can’t account for them. Setting money aside for miscellaneous expenses will ensure you have enough to cover things like:

• Pest control: $300 to $500 per treatment
• Furnishing/redecorating a room (especially a kitchen): $2,000 to $18,000
• Security systems: $250 for a starter kit, plus more for third-party monitoring

Lowering the Costs of Homeownership: What Are My Options?

Feeling a little overwhelmed by all the costs of owning a home?

The good news is, there are things you can do to lower or offset some of the costs mentioned above. In this section, we’ll walk you through a variety of options to look into that can lighten your financial load—and put more money back into your wallet.

Option #1: Rent Out Part of Your Property

Taking on a tenant will give you additional monthly income you can allocate in any way you want, whether it’s to help cover the mortgage payments or any other regular expense. Be sure to check local and HOA laws (if applicable) around renting first! For example, you could:

• Rent out a room or unit as living space. If you have an extra room in your home, a guest house, or a finished basement suite, consider renting it out to a family member, friend, or a stranger.
• Rent out storage space. For someone living nearby, this might be a better option than renting from a large self-service storage company.
• Offer your home as an occasional short-term rental. Using platforms like Airbnb to rent out a guest room or a separate unit can help cover some homeownership costs. This option is especially effective if you live in a popular tourist area.

Option #2: Lower Your Mortgage Payment

With some effort, you can reduce the amount of your mortgage payments. Doing so will give you a little extra breathing room—and cash—each month. Your options include:

Lowering your interest rate: If interest rates have decreased since you purchased your home, refinancing your mortgage can result in lower monthly payments. Even a small rate reduction can lead to significant long-term savings. The Federal Reserve recently announced a sizable interest rate reduction in September 2024, so if you bought your home after 2019, refinancing could be an attractive option.

Extend the term of your loan: While this strategy will reduce your monthly payments, keep in mind that you will pay more in interest over time. However, it may be the right option if you need immediate cash flow relief.

Get rid of your PMI: Federal law requires that once your principal loan balance reaches 78%—meaning you’ve built up 22% equity in your home—your PMI should automatically be canceled.

However, you can request that your lender remove PMI when your principal loan balance reaches 80%. If you’ve been current with your payments and your home’s value hasn’t declined, you’ll have a good shot at getting this approved.

Option #3: Upgrade Your Energy Systems

Old or inefficient energy systems are huge money-wasters. You’ll have to spend money to make the below changes, but the long-term savings will be well worth the expense. Some changes might also make you eligible for a tax credit!

• Install energy-efficient appliances. Upgrading to energy-efficient appliances can reduce your utility bills. Look for Energy Star-rated appliances that use less electricity and water.
• Improve your insulation and weatherproofing. Sealing windows, adding insulation, and weatherstripping doors can help reduce heating and cooling costs, improving your home’s overall efficiency.
• Consider installing solar panels. Installing solar panels also reduces long-term electricity costs, and many regions offer incentives or tax credits for renewable energy investments.

Option #4: Reduce Your Property Taxes

With property taxes steadily increasing, few homeowners can afford to pass up opportunities to lower this major expense. You have two options here:

• Challenge your property tax assessment. You can appeal your property tax assessment if you believe your home has been overvalued. Ownwell specializes in helping homeowners reduce property tax burdens—by taking advantage of this service, you could potentially save thousands of dollars annually.
• Apply for tax exemptions. Check if you qualify for local tax exemptions such as homestead, senior citizen, disability, or veteran exemptions. These can lower your property tax bill.

Ownwell Can Make Home Ownership More Affordable

Home ownership is an achievement that, for many, takes years of hard work and dedication. It shouldn’t have to be clouded by financial worries.

Don’t let the hidden costs of homeownership overwhelm you. Instead, be proactive and take advantage of every opportunity to manage and minimize them.

Start today by signing up with Ownwell.

We mix proprietary software and local tax experts to smoothly shepherd your case through the system. They’re familiar with the housing market, know how to build a compelling case, and have the skills to negotiate with appraisers successfully. It’s the most efficient, effective way to lower your property’s assessed value now—and set a favorable baseline for future tax years.

Ready to learn more? Take three minutes and you’re on your way to savings!