Four hidden costs of home ownership
While owning a home is a valuable investment, the costs of owning a home can include hidden expenses that may catch new homeowners by surprise. From property taxes to routine maintenance, these expenses add up quickly and can strain your household budget. So, how much does it really cost to own a house? Read the full blog or jump to the section most relevant to you as we explore the often-overlooked costs of home ownership and how a home warranty can provide a financial safety net:
Hidden costs of home ownership
How a home warranty can help
Find a home warranty that’s right for you
Beware these financial responsibilities that come with their own sticker shock:
1. Property Taxes
The rate you pay in property tax is set by your local township, city, or county, and it can add up to a sizeable monthly payment. Although you’ll find rates under 0.4% in parts of Alabama and above 2.2% in sections of New Jersey, the national average is around 1.1% of the home’s assessed value, according to the Tax Foundation.
With the median home in the US selling for around $420,000, a property tax rate of 1.1% would mean $4,620 per year ($385 per month).
That’s a major expense to account for each month!
2. HOA and condo fees
Homeowners associations have exploded in growth in recent years, and the Foundation for Community Association Research has found approximately 75.5 million Americans live in an HOA, which accounts for about 30% of the country’s housing stock.
Member fees in HOA and condo associations can vary depending on location, but experts say average prices across the US amount to:
- Single-Family Homes: $200-$300/month
- Condos: $300-$400/month
Like property taxes, association fees can quickly add up over the course of a single year.
3. Homeowners insurance
Homeowners insurance is critical for protecting your home (and your investment) in the event of a disaster. If a tornado sweeps through your kitchen, a tree falls through the roof, or a neighbor slips and hurts themselves in your driveway, your insurance is designed to protect you from major financial losses.
It’s a powerful tool and an essential one for protecting one of life’s most expensive assets.
Researchers at NerdWallet found the average annual cost of a homeowners insurance policy is $1,915 ($160/month). Some states, like Hawaii, see average rates as low as $43/month. States like Oklahoma, meanwhile, see average rates peaking around $458/month.
4. Routine maintenance and home repairs
Preparing for routine and unpredictable repairs around the house can also set you back each month.
There’s plenty that can go wrong, including:
- Your roof is damaged in a storm
- Your HVAC breaks down after years of service
- You uncover an electrical issue during a remodel
- A pipe bursts in the bathroom
- You find termites in the basement
- You find mold under the kitchen sink and throughout your cabinets
- A flood tears through your yard and rips up your grass and small foliage
All of that can be expensive to fix, which is why experts recommend saving at least 1%-2% of your home’s purchase price every year for those unexpected repairs.
As we said earlier, the median price for a home in the US is about $420,000, so saving 1%-2% would mean setting aside between $385 and $770 per month.
