Buying a home is a significant milestone, but owning a home comes with many more expenses than just the purchase price. As you consider buying a home, it’s essential to factor in the ongoing costs of homeownership to ensure you’re prepared for the financial responsibilities that come with it.

The Real Cost of Owning a Home

______________________________________________________________________

• Home maintenance costs can range from 1% to 3% of your home’s value annually.
• Homeownership expenses can increase your monthly payments by 20% to 50%.
• It’s essential to have 6-12 months’ worth of maintenance costs saved before buying a home.

______________________________________________________________________

Home Expenses Beyond the Mortgage Payment

Your mortgage payment likely includes homeowners insurance, property taxes, and HOA fees (if applicable). However, other necessary costs, such as maintenance, repairs, and upgrades, must also be considered. These expenses can add up quickly, so it’s crucial to budget for them.

Maintenance and Repairs: A Necessary Evil

Maintenance and repairs are essential to keeping your home in good condition. Budgeting about 1% of your home’s value annually for maintenance is a good rule of thumb. This includes costs like:

• Appliance replacements
• Roof repairs
• HVAC maintenance
• Plumbing fixes
• Electrical work
• Pest control
• Yard maintenance

For example, replacing a roof can cost between $5,000 and $15,000, while a new HVAC system can range from $3,000 to $10,000. Regular maintenance can help prevent these costly repairs.

Upgrades and Cosmetic Changes

Upgrades and cosmetic changes can enhance your home’s value and make it more enjoyable to live in. However, they shouldn’t be prioritized over essential maintenance. Budget for upgrades like:

• New paint
• Light fixtures
• Flooring
• Landscaping
• Kitchen renovations
• Bathroom remodels

These upgrades can cost from a few hundred dollars to tens of thousands of dollars. For instance, a kitchen renovation can cost between $10,000 and $30,000.

Tracking Home Ownership Costs

Keep track of your expenses using a home maintenance spreadsheet. Assign a dollar value to each item and prioritize essential maintenance over upgrades. Review maintenance records from the previous owner (if available) to understand the home’s history.

Is it Less Expensive to Own a New Home?

New homes may have lower maintenance costs initially, but there are still expenses to consider:

• Landscaping and lawn care
• Watering and maintaining a new lawn
• Potential repairs due to settling foundations
• Upgrading fixtures and appliances

New homes often require additional expenses, such as:

• Installing window treatments
• Adding outdoor features like decks or patios
• Upgrading flooring or countertops

Upgrades and Renovations: What Do They Cost?

Upgrading your home’s interior can be costly. Use online tools or consult with professionals to estimate costs for projects like:

• Kitchen renovations: $10,000 to $30,000
• Bathroom remodels: $5,000 to $15,000
• Flooring replacements: $2,000 to $10,000
• Roof replacements: $5,000 to $15,000

The Importance of Budgeting

Budgeting for homeownership expenses is crucial to avoid financial stress. Consider the 50/30/20 rule:

• 50% of your income goes towards necessary expenses (mortgage, utilities, insurance)
• 30% towards discretionary spending (upgrades, entertainment)
• 20% towards saving and debt repayment

Are You Ready to Own a Home?

Consider your financial readiness for homeownership by:

• Adding a trial maintenance budget to your expenses
• Choosing a smaller mortgage or carving out funds from your existing budget
• Setting aside extra money for maintenance costs for 6-12 months before buying

By doing so, you’ll better understand whether you’re ready to take on the financial responsibilities of homeownership.

Additional Costs to Consider

Other expenses to factor into your budget include:

• Homeowners association (HOA) fees
• Property taxes
• Homeowners insurance
• Utility bills
• Maintenance and repair costs

Final Checklist

Before buying a home, consider the following:

• Calculate your total monthly expenses, including mortgage payments, utilities, and maintenance costs
• Budget for upgrades and repairs
• Review maintenance records from the previous owner
• Consider the 50/30/20 rule for budgeting
• Set aside extra money for maintenance costs for 6-12 months before buying

By following this checklist, you’ll be well-prepared for the financial responsibilities of homeownership.

Conclusion

Owning a home is a significant investment, and it’s essential to understand the actual costs involved. By budgeting for maintenance, repairs, upgrades, and other expenses, you’ll be better prepared for the financial responsibilities that come with homeownership. Remember, owning a home is a long-term commitment that requires careful budgeting and planning.

Subscribe to our newsletter to learn more about the cost of owning a house.