The Hidden Costs of HomeOwnership

Vincenza Vicari-Bentley, AFC
Empowering Financial Wellness Program Coordinator 

15 years ago, when I bought my first house with my spouse, we were so excited about being homeowners! 3 months into our newlywed life as homeowners the dishwasher, garage door opener and water heater all broke, within the same month!!!  I thought wait….didn’t we just have our home thoroughly inspected before purchasing? How can all these things break so soon? Reality check. I thought as long as we could afford the monthly mortgage payment we were going to be okay.  There are a lot of hidden costs of homeownership so here are some things you may want to consider before you take that next step.

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1. Mortgage Insurance - you don’t have to have 20% of the purchase price to put as a down payment but if you do end up putting down less than that your lender will most likely require you to obtain private mortgage insurance. This insurance is usually added to your monthly mortgage payment. The expense can vary depending on the type of mortgage and how much money you’re putting down. You can request to cancel your mortgage insurance after you pay down the loan to a loan-to-value (LTV) ratio of 80%. This usually requires getting your home reappraised which can cost you several hundred dollars. 
2. Taxes/Insurance & Utilities - according to Zillow, in the U.S. a typical homeowner pays about $757 per month on top of a monthly mortgage payment to cover these. These are unavoidable expenses as a homeowner. 
3. Maintenance & Repair Costs - as a renter, if something needs repair you call the landlord or property manager.  But as a homeowner, there are hundreds of expenses associated with homeownership like replacing appliances, replacing a roof, plumbing issues and yes toilets break too!  And then there always is the need to make it your own whether it’s window treatments, new flooring, remodeling...the list is endless. There is a rule of thumb recommended by financial experts that states you should save 1%-2% of your home’s purchase price for ongoing repair costs. Typical home value in the U.S. is currently at about $281,000 so if you are saving 1% that means saving at least $2810 a year or putting about $234 a month in your budget. A lot of first time home buyers often have unrealistically high expectations of how much they can afford to spend because they aren’t aware of all the expenses. I can tell you that I would have liked to have read a list like this before my husband and I bought our first home! Being financially confident about big purchasing decisions begins with having life goals, and where and how you live your life is a big part of that.