You’ve spent time researching, saving, and looking for your ideal home. In your budgeting, you’ve accounted for a down payment and closing costs, but are you aware of the additional expenses you’ll face when closing on your home? While purchasing property is expensive, maintaining your investment costs a fair amount. Before you take the plunge into homeownership, consider the following expenses.
1. Co-Op and Condo Fees
If you purchase a condominium or co-operative, you will be subject to additional fees, typically referred to as maintenance fees for co-ops or common charges for condos. These fees vary by community but can cost several hundred dollars a month.
The charges usually cover items like the salaries of employees, maintenance and repairs of common areas, costs associated with the building’s insurance or mortgage, etc. While the prices are quite high, they directly go to maintaining the communal areas you occupy with your neighbors. When you live in this type of property, you do not have to worry about repairing things like the roof of the building or the outdoor area. Make sure to discuss the cost of these charges with your agent or the building early in the process.
Even if you do not have condo or co-op fees, you may be a part of a Homeowners Association (HOA) and pay a monthly membership fee. When you move to a home in a designated HOA, you automatically become a member and must make your monthly payment. Additionally, you may grow subject to fines should you break the rules of your HOA. Some standard rules you agree to include:
- Decorate your home’s exterior according to the paint color, lawn accessories, and window coverings designated by the board of directors.
- Limits on guests and pets.
- Interact with communal areas according to board standards.
On average, an American spends $300 a month on their fees. As a good rule of thumb, the more amenities in your community, the higher your monthly fees.
2. Pest Control
No matter your location, there are bound to be species of pests that you will need to address. Whether it be termites or squirrels in the walls, you will likely need to hire a specialist to come and tend to the invasion. Depending on the type and severity of the invasion, your exterminator or wildlife remover may pay you periodic visits or complete the removal on a one-time visit.
However you decide to handle the problem, the cost of removing pests from your property can add up quickly. You may also need to spend money on repairs should the species damage your home.
3. Property Taxes
As a homeowner, you must pay property tax. The amount you pay varies depending on your home’s type, size, and location. Your property taxes go to maintaining the community you live in, toward things like road work and education.
While the exact amount of property taxes varies per person, the 2020 U.S. Census reports that the average American spends $2,551 on property taxes each year. Some states like New Jersey have expensive property taxes, where the average homeowner pays around $5,000 per year. Most local governments send your property taxes as one bill but allow for repayment installments, so you don’t have to foot the entire amount at once.
4. Homeowners Insurance
Homeowners insurance protects your home and possessions if natural disasters, fires, theft, or other accidents occur. Most lenders require you to purchase home insurance if you finance your home with a mortgage. While you do not have to buy it should you finance your home with cash, most homeowners will acquire insurance as the cost of rebuilding and repairing a home dramatically surpasses the monthly fee.
There are several home insurance packages you can choose from depending on your needed coverage. If you live in an area prone to disasters, you may even take on additional forms of insurance. Additional forms include flood, earthquake, and sewer backup insurance. Like property taxes, your home insurance costs vary depending on your home’s value, size, and location. The average New York homeowner pays around $1,200 per year for home insurance.
5. Home Improvement and Decorations
Most homeowners find some enjoyment in decorating and improving the condition of their homes. However, personal touches and upgrades can add up quickly between tasks like painting walls, changing light fixtures, or remodeling the kitchen. If you do not have one already, we recommend creating a solid budgeting system and tracking all potential expenses associated with your upgrades.
If you decide to cut costs and complete projects yourself, make sure to account for the small items you need for each project.
Furnishing your new home can also run up quite a hefty tab. Perhaps your old furniture does not work in your new space, or maybe you are moving into your first home and simply do not have items for most of your rooms. While sleeping on a mattress on the floor may suffice for a few weeks, odds are you will want to get as many essentials as possible within the first few months of moving in.
If you’re moving into a home for the first time, or maybe the first time in a while, and drastically upgrading your amount of space, you can throw a housewarming party and create a registry of items you want or need.
Additionally, when you change your address with the post office, you can sign up to receive coupon packets for popular furniture stores and home improvement services in your area. You can easily change your address online.
To further save on costs, you can purchase gently used furniture from thrift stores, flea markets, and online marketplaces. While you should use your own judgment about which pieces to buy, many sellers list gently used items that will work nicely in your home.
7. Lawn Care
Should you purchase a home with yard space, you will have to invest some money into maintaining the outdoor area. If keeping your yard in pristine condition is your goal (or a requirement from your HOA), you will hire someone to tend to the space, or you can purchase the tools to do it yourself. Different climates and times of the year will call for other methods of care, as you may go from mowing your lawn and putting down fertilizer in the spring to raking leaves and composting them in the fall, then snow blowing your walkway and driveway in the winter.
If you need help tending to your outdoor space, we recommend researching who to hire before the busy season, as most seasonal employees will book up quickly in their active months. You can also try getting friendly with your neighbors to learn who they recommend.
8. Utility Bills
Your utility costs will vary by the climate of your location and the size of your home. If you purchase a large house in a cold area, you may spend lots of money on heating in the winter. If you are unsure how much to budget for your utilities, you can ask your agent to communicate with the seller to learn about their monthly expenses.
To cut down on the cost of utilities, you may consider upgrading some of your home’s components to energy-efficient models. Windows, appliances, and thermostats have energy-efficient versions that help the planet and your wallet.
According to move.org, the average American spends $400 a month, or $4,800 a year, on utilities.
Depending on the type of home you purchase and the features of your property, you may be subject to high maintenance costs. The plus side of condo and co-op owners is that you cover maintenance costs in your monthly fees.
For all other homeowners, you should consider every aspect of your property that may cost you money. Do you have a pool that needs regular upkeep in the warmer months, or do your gutters get clogged easily? Are you on a city sewage, or do you have your own sewage system that requires maintenance every once in a while? By creating a list of the costly components of your home and then researching the cost of upkeep of those features, you can save yourself a headache down the line. Some standard features most homeowners spend money on include the following:
Your roof’s primary job is to keep water out of your home. Storms and daily wear and tear may puncture holes in your roof or create a leaky surface over time. A leaky roof can cause many problems if not tended to, from overall water damage to structural issues.
Some roofs may need to be replaced every ten to twenty years. At the time of your purchase, you can inquire about the current state of your roof and learn when the owners last replaced it.
Most homeowners will encounter a plumbing issue while living in their homes. While you may be able to enlist the help of the internet to guide you through minor fixes, you may need the help of a professional for larger projects.
Older homes typically have more severe plumbing issues, which could require a complete replacement in time.
Heating, Ventilation, and Air Conditioning (HVAC) Systems
If you have an HVAC system in your home, you should have a professional come and inspect it once a year to ensure everything works properly. You should also replace your filters regularly for the sake of your air quality and the longevity of your system.
Learn more about Safe Ways to Heat Your Home
Similar to maintenance, most homeowners will cover the cost of various repairs. While there may be times when you can anticipate the cost of necessary repairs, there may be other times when you have to front a significant amount of money to repair something immediately. Issues relating to water damage, faulty wiring, and heating systems may require quick assistance, often without much warning.
Make sure to leave enough in your savings account after closing on your home to make sure you can cover the cost of an emergency repair as needed. Then maintain that budget, so you are always a step ahead, even if you do not see the repair coming. Additionally, you may consider taking out a home equity line of credit or home equity loan, which provide lump sums of cash with a comparatively low fixed interest rate.
Generally speaking, you should expect to spend 1% of the purchase price per year on maintenance and repairs. According to the average home price of $428,700, that means you will spend $4,287 per year.
If you are considering purchasing your own home, consider the above examples of hidden house costs and then continue to research the specific amount of each item while looking at actual property. Considering all the above costs, the average American spends around $16,438 on the hidden costs of their home. Of course, this number changes based on location, the type and size of your home, and other variables more associated with your personal taste.
By staying educated about the true costs of owning a home, you can set yourself up for success and prepare to handle various potential bills.