The True Costs of Owning a Home: It May Surprise You

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The True Costs of Owning a Home: It May Surprise You

You’ve probably heard many people say “renting is just throwing money away” and buying a home is the better financial decision.

That may be the conventional wisdom, but does that mean that it’s true?

The problem with really common advice is that we often assume it’s correct, or absolute, without taking the time or making the effort to understand it for ourselves. And then we pass it on to other people, because we think it’s true.

The truth is, homeownership is expensive. There are some definite perks to owning a home, and there are a lot of reasons to be a homeowner. But there are also a lot of negatives that tend to get glossed over.

This article isn’t really about renting vs. buying and how to decide which is the right move for you (for that topic, please see my article Buying vs. Renting). Today, I want to look at the true costs of homeownership. Before you can make an informed decision about renting vs. buying, you need to understand the big picture.

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My Homeownership Experience

Just to give you some background on my perspective, my wife and I bought our first home in 2007, about 9 months after we were married. It was a two-bedroom condo that we planned to live in for a while, and then keep as a rental property when we eventually moved.

As it turned out, 2007 wasn’t such a good time to buy a home. The value dropped very shortly after we bought it.

In 2008, I started working from home. In 2010, my wife was able to transfer into a role that allowed her to work from home as well. Once that happened, we decided to move to an area with a lower cost of living.

We sold our condo in 2010, and we had to take about $7,000 to the settlement to get out of the mortgage since the value had dropped. But on the bright side, we were able to buy a new construction single-family home for what we felt was a really good price.

Four years after buying that single-family home we paid off the mortgage to become completely debt-free.  We planned to be in that house for a long time, but in 2016 (after 6 years in the house) we moved to another home a few miles away, which is our current home. We moved mostly to get a bigger lot and more privacy.

Since we had become accustomed to not having a mortgage payment, we decided to pay for our current house in cash, even though it was almost $200,000 more than the house we sold.

We’ve lived in a small condo, a moderately-sized single-family house, and now a bigger single-family house (we now have two kids as well). We’ve lived in a new construction, and our current house is almost 30-years old now.

I don’t want this article to come off as being against homeownership, because I actually prefer to own my home. But I do want to take a balanced look at the issue and talk about the real costs that come along with being a homeowner.

The Costs of Homeownership

There are some costs of buying and owning a home that are pretty obvious. These are the ones that most people consider when making a buying decision. We’ll get to the hidden costs in the next section.

For this article, we’re going to look at a fictional example. Of course, property values and the associated costs of home ownership vary drastically depending on where you live, the type of house you buy, and many other factors. 

I want to work with numbers in this article to make it a better illustration, but keep in mind that these numbers are just a fictional example.

For our example, we’ll assume a purchase price of $300,000 for a home. Depending on where you live, this might be a really nice home, or it could be unrealistically low.

Costs of Buying a Home

The transaction costs for buyers tend to be about 2% – 5% of the price of the home (source). I don’t want to get into all of the details of these costs here, but I do have an in-depth article about the costs of buying and selling a house if you want more information.

For our example, let’s go with 3% of $300,000, which comes to $9,000 in fees and transaction costs.

That does not include the down payment. Typically, you’ll want to put 20% down to avoid paying private mortgage insurance (PMI) each month. PMI can really add to your monthly mortgage payment, and it does nothing for you. It’s there to protect the lender, not you.

If you were to put 20% down on a $300,000 home, that would be a down payment of $60,000. After the $60,000 down payment, that leaves a mortgage of $240,000.

So the total of the down payment and the fees and transaction costs comes to $69,000.

The Monthly Costs of Homeownership

The most obvious monthly costs of homeownership include:

  • Mortgage payment – $1,216 (based on 4.5% interest on a 30-year mortgage)
  • Property taxes – $500
  • Homeowner’s insurance – $33
  • PMI – $0 (will apply if you put less than 20% down)
  • Homeowner’s association (HOA) fees – $0

These are the costs that add up to your total monthly payment for the home, assuming you have an escrow account with your lender for the taxes and insurance. Even if you don’t have an escrow account, you should be setting that money aside each month to avoid the shock of an annual bill.

For our fictional example, the monthly costs come out to $1,749, assuming no PMI and no HOA. (Remember, these numbers are a fictional example. Property taxes will vary greatly.)

The Hidden Costs of Homeownership

Ok, so the items covered above are probably the expenses you’ve considered when you’re thinking about the costs of buying and owning a home. But in reality, there are many other costs associated with being a homeowner. These costs can vary depending on the home and the property.

You probably won’t have all of these expenses, but you will have many of them, and they are all possibilities. Some of them are things you can do yourself, but also keep in mind, that requires an investment of a lot of your own time.

Let’s take a look.

Maintenance and Upkeep

Being a homeowner requires a lot of maintenance and upkeep. Just how much will depend on things like the age of the home, how well the home has been maintained in the past, and the size of the home.

This can include things like fixing appliances, plumbing, electrical work, and anything else that needs to be fixed. Some of the expenses that fall into this category could be planned expenses (like a yearly servicing of a furnace), or it could be unexpected things that come up.

As a general rule of thumb, most experts recommend budgeting for maintenance expenses to equal 1% – 2% of the home’s value each year.

For our estimate, we’ll go right in the middle at 1.5% per year. That comes out to $4,500 per year, or $375 per month.


Your utility expenses will include things like electricity, natural gas, water, sewer, and I’ll also include trash in this category. According to this study by ATTOM Data Solutions and UtilityScore, utility costs add 25% to U.S. homeownership costs.

25% of the mortgage payment of $1,216 equals another $304 per month for utilities.

Security System

If you have a home security system, you will probably have monthly monitoring fees. The fees can vary depending on the plan that you have and the company you choose, but $30 per month is a reasonable estimate. And if you’re getting a new system, you may have some costs to purchase or install the equipment.

House Cleaner

This is an expense that can be avoided, but it’s also an expense that many homeowners pay. You could also hire a cleaner if you’re renting, but rentals tend to be smaller, and cleaning a bigger house takes more time, and you’re more likely to hire someone to do it.

The cost will vary depending on who you hire, how often they clean, and the size of your house. As a safe estimate, we’ll go with $200 per month.

Lawn Care

If your house has a yard, someone will need to take care of it. Of course, you can do it yourself to save some money, but many homeowners pay someone to do it so they can do other things with their time.

This obviously includes mowing the grass, but it can also include treating the yard and getting rid of weeds. You can do that yourself, but in many cases you can pay someone to do it for you cheaper than you can buy the chemicals on your own.

The good news is, depending on where you live, you may only need to have the lawn mowed for part of the year.

For an estimate of the cost of mowing, let’s go with $100 per month for 6 months out of the year, which comes out to an average of $50 per month for the entire year.

And for lawn/weed treatment, let’s go with a cost of $120 per year, which comes out to an average of $10 per month.


Depending on your property, you may need to hire someone to do landscaping. This can include gardening, trimming trees and plants, leaf cleanup, mulching, planting, and more. Of course, this cost will vary significantly depending on your property and what you choose to do, or not do, with it. As an estimate, let’s go with an average of $30 per month (which would only cover a very small amount of work).

Pest Control

Bugs, mice, and other pests can cost money too. We live in a wooded area, so we have a monthly subscription for pest control and it is pretty much a necessary expense. I could try to do it on my own, but I’d still have to buy a lot of supplies and I wouldn’t do as good of a job. We pay $50 per month, and that’s a decent price for the service that we get.

Our previous home was not in an area where we needed pest control, but I did buy bug spray and rabbit repellant and took a DIY approach. We also had a situation where some birds were getting into our dryer duct, and we spent at least $300 to get that taken care of.

Snow Removal

Depending on where you live, you may need to pay someone to clear your driveway and sidewalk after it snows. I’ve never paid for snow removal, but I paid for a snowblower and spent many, many hours of my time doing it myself. That includes lost working hours on several occasions.

The good news is, unless you live in a place like Buffalo, NY, you will probably only need to pay for snow removal a few times per year. For our estimate, let’s go with $240 per year, or an average of $20 per month.


Of course, you’ll need furniture whether you rent or own your home. But since most renters have smaller homes and apartments, most homeowners spend more money on furniture simply because of having a larger space to fill.

Yes, you can avoid this to some extent. My wife and I had a living room with no furniture for several months, and I know other people who have waiting a few years. But eventually you’re almost certain to spend more money on furniture if you have a bigger house.

I’m not going to estimate an expense here, because this is more discretionary than most of the other expenses on this list.

Home Improvements

One of the nice things about owning a home is that you can do things to change or improve it, and make it the way you want it. The downside is, home improvements cost money. And a lot of money in many cases.

This can include simple things like painting or replacing light fixtures, and it can also include much bigger things like a full kitchen renovation or building an addition.

Common home improvements include things like new flooring, updating kitchens and bathrooms, adding a deck or a patio, new windows, and many other things.

Again, I’m not going to estimate an expense here, because this is very discretionary. It also depends on things like the age and size of the house.

Damage from Kids

One thing I’ve learned from the past 6 years of having kids (especially the last 3 years with a son) is that they break a lot of stuff. If you have kids, expect to spend some money fixing things that they break.

Of course, kids will break stuff whether you are renting or owning, but it can make a difference what they are breaking. We moved into our current house when our kids were 3 (almost 4) and 1. In some ways I wish we would have stayed in our old house until our kids were older, because there is more stuff to break in our current house.

Adding Up the Costs of Homeownership

The initial costs to buy the house were $69,000, which included $60,000 for the down payment and $9,000 for fees and transaction costs.

Here is a summary of the monthly costs mentioned above:

  • Mortgage payment – $1,216
  • Property taxes – $500
  • Homeowner’s insurance – $33
  • PMI – $0
  • Homeowner’s association (HOA) fees – $0
  • Maintenance and upkeep – $375
  • Utilities – $304
  • Security system – $30
  • House cleaner – $200
  • Lawn care – $60
  • Landscaping – $30
  • Pest control – $50
  • Snow removal – $20
  • Total = $2,818 per month

That total assumes that you have all of the expenses that we covered, which is probably not the case. Let’s take a look at another situation where you handle a lot (cleaning, lawn care, snow removal, etc.) on your own to cut costs.

  • Mortgage payment – $1,216
  • Property taxes – $500
  • Homeowner’s insurance – $33
  • PMI – $0
  • Homeowner’s association (HOA) fees – $0
  • Maintenance and upkeep – $375
  • Utilities – $304
  • Security system – $30
  • Total = $2,458 per month

So by doing things yourself, you can save $360 per month, or $4,320 per year. That’s not entirely true though, because with the DIY approach you may have higher costs for supplies and tools to do those things on your own.

Also, these totals do not factor expenses like home improvements, furniture, and damage from kids. Home improvements alone can cause these amounts to skyrocket, depending on what you decide to do.

New House vs. Old House

Some of the costs of homeownership (like maintenance and home improvements) will be influenced by the age of your house. As I mentioned earlier, our first single-family home was a new construction, and our current home was more than 27 years old when we bought it. There is a huge difference between the two!

The new home had very few things that needed to be repaired while we lived there. But we did have some significant expenses for things that you won’t get with a new house, like:

  • $6,000 for a shed
  • $6,000 to fence in the backyard
  • $2,500 for a patio
  • $15,000 to finish the basement

When we moved to a 27-year-old home, those types of things were already in place, but we’ve had much higher expenses for maintenance and repairs. In the 2+ years that we’ve lived here we’ve had to:

  • repair the oven
  • repair the ice maker on the refrigerator
  • repair the furnace
  • fix a frozen pipe that burst
  • replace an exterior door
  • fix a leak on the hot tub
  • fix a leak in the underground pipes for the sprinkler system
  • cut down a dead tree
  • have a minor repair to the fireplace
  • have a minor repair on the water heater

On top of that, there are several things that have come up that still haven’t been done, like:

  • cracked granite countertop
  • water issue in the basement
  • cracked epoxy floor in the garage
  • deck boards that need to be replaced
  • cracks in the driveway that are getting worse

With an older home, there’s always something, and it’s usually expensive.

Considering Your Time

Homeownership can require a lot of your time. Personally, I choose to handle things like lawn care, snow removal, and as much landscaping as possible on my own in order to keep costs down. But that means that I have to put a lot of time into it.

At our old house I mowed the lawn and shoveled the snow and that was about it. At our current house I have a lot more to do, and the amount of time I spend really adds up.

In Conclusion

Housing is expensive, regardless of whether you rent or own. Being a homeowner doesn’t mean that magically all your money is producing this asset that is a great investment.

Hopefully this article has helped to point out some of the costs of homeownership that you may not have considered. In a future article, I’ll cover the factors that should be considered if you’re deciding whether you should rent or buy.

The main point of this article is that you really need to look at the expenses you’ll have if you buy a home, and consider your own situation, rather than just buying a home because people tell you it’s the smart thing to do.

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