Homeowners

The Hidden Costs of Homeownership That Homebuyers Shouldn’t Overlook

When you’re trying to figure out your budget to buy a home, it’s all too easy to hyperfocus on the size of your monthly mortgage payment. But that’s not the only cost associated with homeownership.

There are seasonal maintenance and unexpected repairs, home insurance premiums and annual property taxes that can rise, plus homeowner association fees.

“The mortgage payment often draws the most attention. All the other expenses are usually just filed under ‘we’ll deal with it later,” said Reinaldo Gonzalez, founder and real estate agent at InvesTeam Realty in Miami. “But the truth is, later arrives quickly.”

Looking beyond the mortgage payment and understanding the other financial obligations of homeownership, may help you to choose a property that aligns with your budget as well as your long-term goals. 

Here’s a closer look at the financial blind spots that often catch homeowners off guard. 

Home maintenance is an ongoing expense

A home is a system that includes vital components like a roof, HVAC, gutters, and so much more. Unfortunately, every part of it quietly ages from the day you get the keys. 

The mistake is treating home maintenance as optional and waiting until something breaks. It’s often more cost-effective to keep the property in good shape.

“A buyer who budgets a set amount every month for upkeep keeps small issues small,” said Mosi Gatling, senior vice president of strategic growth and expansion at New American Funding. “The one who doesn’t [may] end up turning routine maintenance into an emergency repair, which can cost thousands more.”

Repairs can be needed at any time

Repairs are different from maintenance, and you should plan for them separately. 

You can think of maintenance as the oil change, but repairs as the engine. These are the big, unpredictable hits, such as the boiler or refrigerator that breaks, a leaking roof or flooded basement after a storm, or a foundation issue. 

“I tell clients to walk into ownership with a reserve specifically for repairs, ideally before they ever need it,” Gatling said. “The buyers who get into trouble are the ones who drained every dollar to get to the closing table and have nothing left when the AC system breaks down in month three.”

Home insurance and property taxes often rise over time

Home insurance and property taxes often rise over time, raising monthly mortgage payments. That can make them the quiet drivers behind the common ‘my payment went up and nobody told me why’ complaint, said Gatling.

Often, insurance and property taxes are included in your monthly mortgage payment through escrow. So, you may assume the entire payment is set in stone. Unfortunately, it isn’t. I

Insurance premiums have climbed sharply in recent years, and property taxes can reset as values rise.

HOA fees may change

Many homes these days come with homeowner association (HOA) fees. It’s a mistake to underestimate them.

First, the monthly dues are a real, recurring cost that affects how much home you can comfortably carry.

Second HOA dues can rise. And associations may levy special assessments for big shared expenses like a new elevator for the condo building or roof for the community center or to repave roads. That’s why it’s important to know the size of the HOA’s reserve fund.

These fees can range from very little to thousands of dollars a month.

“I always tell buyers to read the HOA’s financials and reserve study, not just the dues amount. A low monthly fee with an underfunded reserve can mean a large bill later,” said Gatling.

Utility costs may increase

It’s not uncommon to move from an apartment or a smaller home to a larger property and disregard the higher cooling and heating costs involved.

In the summer, for example, a 2,000-square-foot home can easily incur $300 to more than $500 in monthly electricity costs.

Additionally, the costs of utilities typically go up over time. 

“I encourage buyers to ask the seller for past utility bills before they buy, so they’re budgeting from real numbers instead of guessing,” said Gatling.

Mosi Gatling NMLS # 557166