Checklist: 26 Hidden Costs of Home Ownership

Are the hidden costs of home ownership skyrocketing like everything else? The answer is yes and no. It’s always been the case that as thorough as home buyers think they are in itemizing future expenses, costs they didn’t account for eventually present themselves.

In some cases, there’s confusion with the monthly mortgage payments and the fact that the bill is so high when the mortgage loan itself is much less.

Since the COVID pandemic, which brought with it supply-chain issues and high inflation, the costs for fixes have also increased, therefore the cost of home ownership has increased overall.

To cut through all the confusion around which costs you should expect when you buy a home, here is a comprehensive list of expenses, including those rolled into escrow and those which are not.

1. Property Taxes

• Property taxes are based on the assessed value of your home and vary greatly by location. These taxes often increase over time as property values rise. Average annual property taxes vary greatly
• To estimate your property taxes each year, find out what the property tax rate is in your county and follow this formula: Annual property tax = Property value * (Property tax rate %/100).⁽¹⁾
• Property taxes are often rolled into escrow. It’s important to contact your lender if you become aware of upcoming increases in your taxes so that you are paying the right amount in mortgage payments each month. Otherwise, you’ll have to pay at the end of the year.

2. Homeowners Insurance

• Homeowner insurance is usually required when someone takes out a mortgage. The home technically belongs to that lender, and they will want to know that their asset is protected against damages.
• If you do not buy a homeowners insurance policy, a lender may add a force-placed home insurance policy on your home and roll it into escrow. Their choice for homeowners insurance coverage is usually more expensive than comparing rates on your own to find the right policy.
• Homeowners insurance also varies greatly by location. Other factors include the size of the home, the home’s age, the deductible amount chosen, your credit score (if allowed in your state), how many claims you’ve filed in the past, in what condition the roof is in, and risk factors
• Your coverage limit needs to be based on the rebuilding cost of the home, not the market value.
• Certain breeds of pets may increase your home insurance rate, because injuries covered by pets are covered by home insurance.
• If you have a swimming pool or trampoline, you’ll pay more in home insurance rates.
• If you choose a replacement cost policy, it will cost you more but you’ll be covered for an entire project versus an actual cost policy which will deduct depreciation from your belongings, which are covered in a home insurance policy.
• There are limits to coverage, so buy riders for expensive items like pricey jewelry, art or watches. Silver and gold stored in the home should also be covered separately.
• Earthquakes and floods are always excluded in home insurance coverage. Go over the exclusions list to make sure you understand what you may need to pay for on your own.
• Infestations like rodents, fleas, ticks, roaches, termites and mold are not covered in a home insurance policy. You can buy additional riders for these common problems. If you live in a humid climate, mold is more likely to develop, but it is a problem in all states.
• Home security systems may knock off a portion of your home insurance premium and so will living close to a fire station.
• Sometimes, bundling a home insurance policy with an auto insurance policy can score you a big discount.
• If you’re not comparing homeowners insurance (and car insurance) rates every six months, you’re probably paying too much in premiums.

3. Private Mortgage Insurance (PMI)

• If you plan to put down less than a 20% down payment when you buy a home, lenders will require private mortgage insurance (PM)I, which will increase your monthly mortgage payment until you reach 20% equity in the home, because the insurance premiums are rolled into escrow.
• If the lender approved you knowing you were putting down less than 20% but did not mention PMI, you may want to consider saving more money before buying a home to avoid this hefty cost.
• A PMI payment is 0.5% to 2% of the loan balance per year, rolled into escrow.

4. Maintenance and Repairs

• Routine maintenance and repairs may be needed, even if the home passes inspection. It may be a pipe that starts leaking or a toilet that gets clogged easily.
• If you have a fireplace, a chimney specialist should check it each year to make sure it is not dangerous to operate. Filters need to be changed for the HVAC, the oven range and more.
• Repairs or replacement of systems, like heating, ventilation, air conditioning, plumbing or electrical can be incredibly expensive.
• If you’re used to apartment living, consider everything you will now be responsible to pay for, and go over average ongoing maintenance costs.
• Building an emergency fund is a wise strategy to have the money for maintenance and repairs on hand.

5. Utilities

• Utility costs for electricity, water, and garbage collection vary widely according to usage and location.
• Utility bills tend to be higher in larger homes and homes with high ceilings.
• Unexpected costs like connection fees may apply to cable bills.

6. Homeowners Association (HOA) Fees

• Many condominium, and some single family homes, belong to a homeowners association, which charges monthly fees, which are usually not rolled into escrow and must be paid directly to the HOA
• HOAs vary according to the desirability of a location and the shared amenities. You can expect to pay much more in a posh neighborhood, where there is a swimming pool, spa and clubhouse than you would in a community that is in a less affluent neighborhood and offers only basic amenities, like trash collection.
• If your home is in a community with a homeowners association (HOA), you’ll have to pay monthly or annual dues for shared services and amenities.
• The average HOA fee is about $250 a month.⁽³⁾

7. Landscaping and Yard Maintenance

• Unless you’re going to do it yourself, paying for yard work and the maintenance of a green lawn costs money. If you are doing the work yourself, you’ll have to buy equipment, like a lawnmower and leaf blower.
• You may need to hire landscapers to provide lawn care services and plants that are suitable for your property and the amount of light they will receive.
• Some HOAs may do the landscaping for you while others will expect you to take care of your own lawn. It all depends on what is considered a shared amenity.
• If your landscaping is damaged by a very specific set of events, homeowners insurance may cover your lawn, shrubs and trees.

8. Pest Control and Infestations

• You will need to pay for your own pest control services for problems such as termites, bedbugs, cockroaches, a mold infestation or even ticks and fleas.
• If you do not take the necessary steps to rid your home of the infestation, it may damage your home or belongings and even affect the health of household members. Some people are allergic to mold and cockroaches.
• Some infestations have special riders you can add to a home insurance policy. For instance, you can buy a mold rider and you’ll have coverage for taking care of removal before it spreads.

9. Home Improvements

• To maintain or increase the value of your home, you may need to invest in updates like a new kitchen, new windows, more energy-efficient systems, or cosmetic improvements, which can be expensive too.
• When shopping for a home, it’s important to consider what will need an upgrade and how much it will cost. Even a simple paint job can cost a few thousand dollars.

10. Closing Costs

• Closing costs can range from 2% to 5% of the home’s purchase price. Closing costs can include many, if not all, the following:
  • loan origination fees
  • appraisal fees
  • title insurance
  • homeowners insurance
  • property taxes on the home
  • recording fees
  • home appraisal
  • credit report
  • escrow deposit
  • mortgage insurance
  • broker commissions
  • attorney fees
  • courier fees
  • flood certification
  • underwriting fee
  • transfer tax
  • points (paid to decrease interest rate)
  • pest inspection
  • survey fee.

11. Moving Costs

• Moving from your old residence into a new home may require hiring movers, renting trucks and purchasing packing supplies.
• If you’re strapped for time, you may have to pay extra for help in packing what you haven’t packed already.
• If you’re moving long distance, the move may cost quite a bit more.
• If your belongings suffer damage during a move, homeowners insurance may cover the damage.

12. Security Systems

• Many homeowners invest in security systems to protect their property, a smart move that can actually reduce homeowners insurance costs. However, a good security system comes with installation costs and monthly monitoring fees.

13. Flood and Earthquake Insurance

• If you live in an area that is prone to floods or earthquakes, you’re not covered for damages and losses resulting from these perils with a homeowners insurance policy doesn’t. Every home insurance policy excludes these events.
• You’ll need a separate earthquake policy and a separate flood policy. Check to see if the home you’re buying is in a flood zone or an area with frequent earth movements.

14. Sewer and Water Line Repairs

• Sewer and water lines connect your home to the main systems in your area. Ruptures or blockages in these lines can be expensive and are usually the homeowner’s responsibility to repair.

15. Property Management Fees (For Rentals)

• If your purchase is investment property that you plan to rent, you’ll need to buy landlord insurance, not homeowners insurance.
• You may need to hire a property manager.

16. Appliance Replacements

• Major appliances, such as the refrigerators, washer and dryers and water heater age and need to be replaced, sooner rather than later if the appliances in the home are old.
• Appliance repairs are not covered by homeowners insurance.

17. Driveway Paving

• If someone gets hurt walking up your driveway to get to your home, you are liable for injuries and the cost of medical care.
• Homeowners insurance will cover the cost of the injured third parties, but it will raise your rate come renewal.

18. Landscaping

• It’s good to remember that when you buy homeowners insurance, you should never buy coverage for what’s covered, mainly the existing structures and some elements of landscaping, like certain trees and shrubs and under limited circumstances.

19. Leaf and/or Snow Removal

• In the fall, there will be leaves to rake and in winter there will be snow, unless you live in a warm climate, which has less upkeep. You’ll either have to buy equipment or hire a landscaping company to do the work for you.

20. Trash Costs

• Trash bills vary according to location and bin sizes and quantity.
• You can take your trash to the local dump yourself, but there’s still a fee.

21. Deck or Patio

• Check the deck for termites, which can destroy the patio. If there’s already extensive damage, you may need to get termite extermination to prevent damage to the home.
• You may need to invest in a new patio or some work on it, if it’s in bad shape.
• A deck will need regular power washing, painting or staining.
• A patio costs less than half the cost of building a deck and because patios are often made of concrete, there’s less upkeep. However, some people have a patch of grass on their patios, which requires lawn care.

22. Pool Costs

• There is the usual cleaning and maintenance of the pool, which you can do yourself or pay someone to do but there are hidden costs in having a swimming pool.
• Your homeowners insurance rate will rise if you have a swimming pool, which like a trampoline, is considered an attractive nuisance that may attract children, who could drown or get injured if they access the pool.
• Building a secure fence around the pool will reduce your liability for accidents (and deaths) and it’ll lower your homeowners insurance rate too. However, that is also a hidden cost.

23. Windows

• Your windows will determine how high your heating and cooling bills will be. Making sure the windows and doors are sealed properly will help you cut those costs down.
• New windows can add more light in your home too, but they are not cheap. Expect to pay anywhere from $230 to $1230 for a new window.⁽²⁾

24. Home Exterior

• Regularly painting the siding isn’t just a cosmetic thing, but quality paint also protects the home from the elements.
• Gutters need to be cleaned and cleared regularly or else water may enter the home and cause water damage to the house itself and your belongings.

25. Roof

• A roof replacement is expensive, and when you try to avoid replacing an old one, the damages to the home and belongings will only increase the cost.
• Roof repairs on newer roofs are also important, because exposure to the elements will cause other problems, like drafts and leaks after rainfall.
• Left unrepaired or not replaced, a damaged roof may cause infestations, like mold.
• Homeowners insurance will not cover a claim for a roof, if it was in poor existing condition.

26. Odd Days Interest

• If you close the sale of your new home at the start of a month, you’ll pay a month’s worth of interest at closing. Try to close as close to the end of the month as possible.