Homeownership often seems like the ultimate financial milestone. However, it also requires significant preparation beyond finding affordable mortgage payments. Owning and caring for a home comes with several expenses that might surprise many buyers.
Beyond the Mortgage: The Full Spectrum of Homeownership Costs
A mortgage is usually the largest bill homeowners have to deal with, but it isn’t the only one. Owning a home involves several other expenses that keep the property safe and functional.
Recent data revealed that 90% of homeowners in the United States underestimated the costs of owning a house, and several expenses surprised them. These expenses can quickly add up, and homeowners must factor them into their long-term budgets.
Maintenance and Repairs
Every home requires ongoing maintenance. Tasks like lawn care and HVAC servicing can seem minor, but these costs add up. Larger repairs like appliance failures and electrical work can arrive without warning and rack up hundreds or thousands of dollars. On average, U.S. water network pipes are 45 years old, and plumbing issues are often expensive to fix.
Insurance Premiums
Homeowners insurance helps protect a property against natural disasters, fire, theft or other policy-specific hazards. Premiums can vary based on the house’s location and risk factors, and some policies require separate coverage for earthquakes or floods. While technically optional, most mortgage lenders require insurance to ensure the safety of the property, making it a nonnegotiable expense.
HOA or Condo Fees
For condominium units or homes governed by homeowners associations (HOAs), fees are a recurring obligation. These payments often cover shared services like security and upkeep of community amenities — efforts which maintain or enhance property value.
Unexpected Expenses
Even in the most prepared households, several unplanned costs may arise for various reasons. Pest infestations, mold and foundation problems are common examples and can be expensive to fix. A financial buffer is essential to handle these expenses since fixing them is usually necessary to keep a home safe and livable.
How to Manage Homeownership Expenses
Home maintenance expenses can be overwhelming, but homeowners can manage these costs effectively with thoughtful planning. Tools like Excel offer an accessible way to create and manage household budgets and expenses.
A proactive approach ensures the property stays well-maintained without excessively straining the owner’s finances.
Create a Maintenance Fund
A dedicated maintenance fund is an effective strategy to ensure homeowners always have access to extra funds for maintenance expenses. Experts often recommend setting aside
1% – 4% of the home’s value each year to cover minor and major repairs.
However, this number can vary depending on the home’s location, age, condition and maintenance history. For example, older homes might require more frequent maintenance and repairs than new constructions.
Prioritize Essential Repairs
Not all repairs are equal in urgency. This is especially important to remember when homeowners encounter multiple issues at the same time. It’s best to prioritize critical repairs — like plumbing leaks or electrical problems — before tackling nonessential projects like cosmetic upgrades.
Plan for Seasonal Expenses
Many household expenses fluctuate with the seasons. For example, homeowners often clean their gutters and perform roof inspections in the fall, and heating bills usually rise during the winter months.
Anticipating these recurring factors allows homeowners to schedule the necessary work and budget in advance. Saving up and spreading out seasonal expenses throughout the year helps reduce financial pressure.
Build an Emergency Fund
A maintenance fund covers mostly predictable expenses, while an emergency fund protects against the unexpected. Government data shows that only 55% of American adults have at least three months of emergency savings.
An emergency fund is a financial cushion that provides peace of mind, ensuring homeowners can handle crises without using high-interest loans or credit cards.
Proactive Preparation for Homeownership
Owning a home is a significant achievement that comes with a lot of responsibility. Understanding the real costs of owning and managing a home is a wise step to ensure adequate preparation and household care over the years.
