7 Hidden Costs Of Buying And Owning A Home

Home ownership is a big step, and on the surface it looks like the right financial decision every time – after all, rent is nearly always more expensive than a monthly mortgage payment. But, as you may have guessed, there is much more to it than that. Comparing monthly rent to monthly mortgage payments overlooks the hidden costs associated with buying and owning a home. We’ve broken these hidden costs down into two sections: the first is focused on the hidden costs associated with buying your home, and the second with the hidden costs of homeownership.

The Hidden Costs Of Buying A Home

hidden costs of homeownership

Real Estate Agent Fees

For many people, finding the right home can be difficult. This is why so many people (87% of home buyers in 2019 per the National Association Of Realtors) opt to hire the services of a real estate agent. Real estate agents can be very helpful, and it’s always nice to have someone is familiar with the home buying process on your side. You can expect the services of a real estate agent or broker to cost about 6% of the sale price, and the costs are typically split evenly between the seller and buyer.
earnest money

Earnest Money

Once you’ve found the right home for you, it’s time to make an offer. Unfortunately, however, offers don’t stand on their own. In order to prove to the seller that your offer is sincere and that you won’t disappear last minute, you will need to put up some earnest money. You can generally expect to shell out between $500 to $1000 in earnest money, or even up to 10% of the purchase price in competitive markets. If the deal falls through because of the seller, your money will be returned.
hidden costs of buying a home

Closing Costs

The term “closing costs” is somewhat of a catchall term for all the small (and large) fees associated with closing on a home. This can be appraisal fees, inspection fees, title fees, escrow fees… the list goes on. While it’s nearly impossible to foresee all the fees that may pop up, expect to pay between 2-5% of the purchase price of the home in closing costs.

The Hidden Costs Of Home Ownership

hidden costs of buying a house

Association Fees

The expenses don’t stop coming after you’ve settled into your home. As you adjust to the mindset of “homeowner”, you will notice that your monthly expenses extend past a mortgage payment. One such expense you can expect is a homeowner’s association fee if you purchased your home in a neighborhood that is governed by an HOA, or similar association fees if you’ve purchased a condo. These fees can be anywhere from $100 to several hundred dollars a month, so be sure to include them in your monthly budget as a homeowner.
property maintenance

Property Maintenance

Property maintenance is ongoing, and you will soon discover that there is always something that needs to be done. Whether it’s lawn maintenance and general landscaping, gutter cleanup before winter, or an unexpected leak, you can expect to spend a considerable amount of time and money on general maintenance of your home. A word to the wise: an ounce of maintenance is worth a pound of repairs. Don’t neglect small tasks and fixes – they can snowball into costly repairs down the line.
general home repairs

General Repairs

Even if you’re on top of your property maintenance, sometimes things just break. It can be your water heater giving out, or your air conditioner going kaput in the middle of August. These things happen, and it’s important to budget ahead and expect the unexpected. Keep an emergency fund specifically for home repairs, and be prepared for the day when you will need to use it.
hidden costs of owning a home

Homeowner’s Insurance

Aside from being a smart thing to have, homeowner’s insurance will likely be required by your mortgage lender. Additionally, if you live in an area particularly prone to natural disasters, such as earthquakes or floods, you may want to supplement your homeowner’s insurance with additional natural disaster insurance. Keep in mind that insurance premiums are not static, and they can go up even if you have not filed a claim.