Homeownership comes with hidden costs that can add up to more than $18,000 a year!
Buying a home in the U.S. has become more expensive, and so has maintaining one. Many buyers might not realize that the “hidden costs” of homeownership add up significantly. According to a new report by Bankrate.com, these hidden costs average $18,118 annually, or about $1,510 monthly. This total includes property taxes, homeowners insurance, and utility bills for electricity, internet, and cable, as well as home maintenance – which is estimated at 2% of the home’s value per year.
These hidden costs have increased by roughly 26% over the past four years, in a single-family home in the U.S. While these same expenses were about $14,428 annually, or $1,202 per month, in 2020. In April, the national median mortgage payment was $2,256, up $144 (6.8%) from the previous year, according to the Mortgage Bankers Association.
“It’s just important to understand that you’re buying a lot more than a mortgage payment. You’re also buying all these additional costs that you’re gonna have to figure out how to pay for”, said Jeff Ostrowski, an analyst at Bankrate.com.
Older Homes May Require More Repairs
Maintenance and repair costs often come as asurprise for new homeowners, because they can vary greatly depending on the home’s age. “Because of the lack of building, we know that homes that are being purchased are older”, said Jessica Lautz, deputy chief economist at the National Association of Realtors. “Homebuyers have to make a compromise along the way, and often it’s the age or the condition of the home”, she added.
The 2022 American Community Survey by the U.S. Census Bureau found that the median age of owner-occupied homes in the U.S. is about 40 years old. Homes of this age “may need system upgrades, so think about a new HVAC [Heating, Ventilation, and Air Conditioning] unit, or windows, or doors”, Lautz emphasized.
A roof typically lasts about 30 years, and vinyl siding can last three to four decades, according to Angi.com, an online marketplace that connects homeowners with professional contractors for home maintenance or renovations. “Those are the kind of costs that can really add up quickly”, Ostrowski noted.
First-Time Buyers
First-time homebuyers often don’t realize the true cost of maintenance and repairs, which are “part of the learning process of becoming a homeowner”, Ostrowski noted. “Once you’ve been a homeowner for a while, you realize everything that can go wrong”, he added.
A common mistake is using up all your savings for the down payment and becoming “house poor”, Ostrowski said. “Then you move in, and you don’t really have any money left for repairs and maintenance, so you wind up running up credit card debt or taking out some kind of higher interest debt to pay for that”, he emphasized.
Importance of a Home Inspection
In recent years, many buyers have waived home inspections due to high competition. Those who were already homeowners and could make cash offers were more likely to skip this step. “They’re not in the same sort of vulnerable position as a first-time buyer, or somebody who’s never gone through the process”, Ostrowski said.
Despite the competition, waiving a home inspection is risky. Inspections are crucial as they help buyers understand upcoming maintenance and repair needs. Skipping this step can lead to unexpected costs after purchasing the home.
“That definitely raises the risk of somebody moving into a house and not realizing that the [air conditioning] was about to go, or the water heater was on its last legs, or the roof needs to be replaced”, he said.