Average Costs Of Homeownership: The Upfront, Monthly And Ongoing Expenses Of Owning A Home
Whether you want the idyllic white picket fence or you’re eager to put the brakes on renting, homeownership may be looking like an increasingly attractive option. But don’t get ahead of yourself and start choosing paint colors just yet.
Before entering the market for a new home, make sure that you’re ready to make such a big financial commitment. The first step is understanding all the costs of owning a home. While some costs, like a down payment and closing fees, may seem more obvious, you’ll still need room in your budget for the less straightforward costs. These include HOA fees, taxes, insurance and more.
Let’s see if you’re ready to start your home buying journey by looking at the upfront and recurring costs of buying a home.
One-Time, Upfront Costs Of Homeownership
Down payment cost on a median-priced home: $10,000 – $70,000
Source: Rocket Homes®
Acquiring sufficient funds for a down payment on a house usually presents the biggest challenge for aspiring homeowners. Clocking in around 3% – 20% of a home’s price, it’s likely you’ll need at least a few thousand dollars saved up for the down payment alone.
Depending on your loan type, you may be able to reduce the cost of a down payment significantly, and in some cases, avoid it altogether. VA loans and USDA loans, for example, have no down payment requirement for eligible borrowers.
A conventional loan provides some flexibility by allowing you to reduce just how much money you want to put down on a house. Bear in mind that, with payments of less than 20% down, most lenders will also require private mortgage insurance (PMI) on top of your monthly payments (but more on this later).
To better understand just how much down payments cost, let’s pretend you’re buying a $392,000 home. According to REALTOR®.com, this is the median listing price for homes in the U.S. as of February 2021.
To make a down payment of 3%, you’d need $11,760 on hand. To pay 20% down and avoid PMI, you’d need to put down $78,400.
Closing costs on a median-priced home: $10,000 – $21,000
Source: Rocket Homes®
Closing costs account for all the fees and charges you’ll incur during the home buying and finalization process. This usually includes things like taxes, insurance, and title search fees. The typical range for closing costs is 3% – 6% of a home’s purchase price.
Let’s use the same median listing price from above: $392,000. The closing costs for this home would range between $11,760 – $23,520. On top of closing costs, the home buyer is typically responsible for covering the cost of home appraisals and inspections.
Monthly Costs Of Owning A Home
You should also be prepared for more costs than just your monthly mortgage payment. While your monthly payments do include paying off your loan, there are other costs to factor into your monthly budget. We recommend using the acronym PITI for an easy way to remember everything that goes into your monthly mortgage payments:
- Principal: Your principal is the total loan amount that you borrowed to purchase your home. Payments toward the principal amount is what reduces your loan balance and builds your equity in your home.
- Interest: This is the agreed upon amount that the borrower must pay their lender for taking out the loan. The interest rate is determined by the borrower’s financial history and other loan terms, like the down payment amount and loan period, as well as current market conditions.
- Taxes: Lenders typically include property taxes as part of the borrower’s monthly payment, storing the money in an escrow account for the borrower until property taxes are due. According to Census Bureau data, the average American pays $2,471 in property taxes each year.
- Insurance: Like taxes, homeowners insurance will generally be included in the borrower’s monthly payment, paid to the insurer out of an escrow account on the borrower’s behalf. The average range for an annual insurance premium varies by state, but typically falls between $800 – $2,000.
Regular, Ongoing Expenses Of Owning A Home
When it comes to maintaining a home, there’s more to it than simply making your mortgage payments. Many costs which may not be at the forefront of our minds are still essential for day-to-day life, and for ensuring the longevity of your home. Let’s unpack some of these essential, ongoing costs of homeownership.
Average annual utilities costs: $4,158
Source: Rocket Homes®
Seasoned renters are already accustomed to the cost of utilities like gas, electricity and water. They should be prepared to foot a larger utility bill when entering homeownership. Owning a home can come with more amenities and square footage, which can mean higher utility bills
Since the cost of utilities varies based on location, we recommend doing your research. Understand each of the various utilities required for a single-family home in your area and make sure that you transfer all the accounts in your name. Missing a utility payment will cost you in penalties, so try to avoid this mistake by knowing know who you need to pay and when.
Housekeeping And Cleaning
Average annual housekeeping and supplies costs: $837
Source: Rocket Homes®
To keep you and your family healthy, a clean home is more of a necessity than a preference. Warding off pests, eliminating bacteria and getting rid of dust all requires some sort of budget. Whether you want to hire a cleaning service or buy your own supplies and do the work, plan for these costs before jumping into homeownership.
Homeowners Association (HOA) Fees
Typical monthly HOA fees: $200 – $300 per month
Source: Rocket Homes®
If you’re looking to plant roots in a community with a homeowners association (HOA) or a condo association, don’t be surprised by the monthly fees you’ll have to pay. HOA fees are a price every resident must take on to be a part of that community. These funds are typically pooled and put back into the community. Communal spaces, like recreational areas or a pool, landscaping and walkway or road maintenance are some examples of what HOA fees are used for.
HOA fees, like most aspects of homeownership, vary based on where you’re located and the upkeep involved in that particular community. For example, a single-family home in a suburban neighborhood will incur a smaller HOA fee than, say, a luxury condo in a popular metropolitan area. Many neighborhoods don’t have HOAs at all.
Private Mortgage Insurance (PMI)
Annual Private Mortgage Insurance (PMI): 0.1% – 2% of loan amount
Source: Rocket Homes®
As mentioned earlier, borrowers who make a down payment less than 20% on a conventional loan are typically required to buy private mortgage insurance (PMI). PMI is a monthly premium of 0.1% – 2% of the loan amount each year. For a $300,000 loan, PMI can be $300 – $6,000 a year, or $25 – $500 a month.
With conventional loans, once you reach 20% equity in your home, you’ll be allowed to cancel PMI. FHA loans, however, use a slightly different type of mortgage insurance. The difference? Borrowers who put down less than 10% with an FHA loan will be stuck with mortgage insurance for the rest of their loan. Additionally, FHA loans require that the borrower pays an upfront fee for mortgage insurance, usually 1.75% of the total loan amount.
Pest Control Subscription
Average one-time visit pest control costs: $250 – $600
Average monthly pest control costs: $1510 – $300 upfront, $45 – $75 per month
Source: Forbes Advisor
Life happens, and sometimes that means dealing with bed bugs, mice or other unexpected visitors. When it comes to protecting your home from these infestations or removing these pests from your home, it’s best to leave things to the experts.
Costs vary based on numerous factors, but it’s wise to have a couple hundred dollars to a few thousand in reserves for this kind of emergency.
Internet, Phone, Cable And Streaming Service
Average monthly cable and internet costs: $116 per month
Let’s face it: today, it’s nearly impossible to live without the ability to communicate efficiently. Factor the costs of your internet provider, streaming services, phone plan and cable into your home buying budget.
While you may not need all of the above, it’s likely that you’ll need reliable internet access. Be sure to shop around for bundles or deals in your area.
Hidden Costs: Repairs And Maintenance
Average annual maintenance and repair costs: $2,913
Source: Rocket Homes®
If there’s one thing many renters-turned-homeowners miss about the rental lifestyle, it’s the ability to simply call maintenance or a landlord to solve a problem. As a homeowner, you’ll need to budget for home maintenance costs and either be prepared to DIY some solutions or outsource locally.
Consider your home’s age, condition, size and location when deciding how much to set aside for potential fixes and replacements. A good general guideline is to budget 1% of your home’s value each year toward these home-related repairs.
Here are some of the most common repairs and maintenance costs that homeowners will run into.
Average one-time HVAC service and maintenance costs: $75 – $200
HVAC is your home’s heating, ventilation and air conditioning systems. To avoid being without AC in the summer heat or without warmth during cold winter nights, you should have your HVAC system checked twice a year by a professional technician.
Average one-time plumbing maintenance/inspection costs: $165
Average one-time technician visit costs: $175 – $450
Plumbing issues are common, but fortunately the repairs are typically on the lower end price point, only spiking in the case of a system overhaul or the need for replacement parts. Handy homeowners may be able to DIY many of these repairs on their own, such as fixing a leaky faucet or a running toilet.
Water And Flood Damage
Average water damage restoration/repair costs: $1,236 – $5,314
Water damage or signs pointing to water damage can raise some serious concern. Whether it’s a burst pipe or a foundational issue which leads to flooding, this is one of the priciest issues to fix. It’s best to get routine check-ups to ensure your home systems are in order and enlist professional help should you need to repair or restore your home.
Roof Repairs And Replacement
Average roof repair costs: $950
Average roof replacement costs: $5,000 – $10,000
A reliable, leak-proof roof is crucial for the safety and comfort of your home. While small roof repair jobs, like a small leak, may cost just a few hundred dollars, larger issues can come with lofty price tags. If you notice an issue pointing to a larger problem with your home’s roof, it’s important to get it fixed ASAP. Small problems can grow rapidly, requiring a roofer to repair or replace a roof altogether, which is a much costlier solution.
Electrical System Problems
Average one-time electrician cost: $300+
Average cost of electrical work: $50 – $100 per hour
To avoid the panic of emptying out the refrigerator when your electrical system fails, work with a licensed electrician to ensure that your home is running smoothly. Electrical systems are more complex, and dangerous, to DIY, so don’t be afraid to work with an expert.
Average foundation repair costs: $2,000 – $7,000
Perhaps the priciest home cost you’ll encounter is to repair a house foundation. From cracks to sinking, you’ll want to address foundational concerns before they can snowball into an even larger problem.
Average termite prevention treatment costs: $225 – $2,500
Dealing with termites is no laughing matter. Take preventative action and enlist the help of a professional to apply repellent or termiticide. This can save you both the headache and costs necessary for termite-induced repairs.
Mold And Mildew Misery
Average professional mold removal costs: $1,108 – $3,369
Not only can mold and mildew in the home cause damage to your property, but it can also raise concerns when it comes to your health. Breathing in mold spores can lead to respiratory problems or trigger allergic reactions. Keep yourself and your loved ones safe by tackling mold or mildew growth ASAP.
Home Improvement: Renovations And Upgrades
Being a homeowner isn’t all fixing problems. It’s also the opportunity to transform a space into something that’s uniquely yours. That’s where renovation and home improvement projects come in. Whether you want your home to reflect your own style or want to customize a space to better suit your lifestyle, let’s look at some different home upgrades to help you figure out what to budget for.
If you want to know how much value a room redesign adds to your home, here are some upgrades you can make and their return-on-investment (ROI) percentages according to Remodeling magazine:
- Minor kitchen remodel:2% ROI
- Window replacements:5%
- Entrance replacement:7%
- Midrange bath remodel: 7%
Kitchen, Bathroom And Other Remodels
The cost of a room remodel depends on what and how you’re remodeling. Here’s are the average costs per room according to Business Insider:
- Kitchen: $23,556
- Bathroom: $10,349
- Bedroom: $7,880
- Living room: $7,264
- Basement: $15,000
- Attic: $49,438
New Furniture And Appliances
What’s the fun in having a new home without comfy furniture to fill it? As a new homeowner, you’re going to have to make some big-ticket purchases for furniture better suited for a more permanent space. According to HomeAdvisor, the average cost of furnishing an entire house is $16,000, so be sure to have some savings set aside.
Landscaping And Lawn Care
According to HomeAdvisor, lawn care typically costs between $100 – $500, although this range varies based on the type of lawn servicing you have in mind. Though many homeowners may want to focus all their energies on their home’s interior, a home’s exterior may be able to increase curb appeal by 5% – 11%.
Decking Out A Patio
Adding a deck or patio is a common project for homeowners looking to increase their living space and enjoy the outdoors. However, these projects can be costly: $7,700 on average for a deck, $3,400 for a patio.
The good news? According to Remodeling magazine, as of 2022, you may be able to recoup about 65% for a wooden deck addition.
What Are The Average Monthly Costs And Expenses Of Owning A Home?
Here are the average approximate costs of homeowner essentials, not including your mortgage payments. It’s important to keep these basics in mind when deciding if you’re financially prepared to buy a home.
$4,158 per year
Housekeeping and cleaning
$837 per year
$200 – $300 per month
Maintenance and repairs
$2,913 per year
The Bottom Line
Before purchasing a home, be sure to budget for everything. There are many costs that can easily slip one’s mind when buying a home. Owning and maintaining a home isn’t cheap but having an emergency house fund or some savings built up can help you avoid financial strain in the future. Like most things in life, the better prepared you are, the better you can manage the unexpected.
Use one of our mortgage calculators for help figuring out how much house you can afford, what your monthly mortgage payments would be or to gain more clarity on whether you should rent or buy a home.