What It Really Costs to Own a Home
I'm a mortgage-free homeowner but I still have plenty of expenses associated with owning and maintaining my house. Some have been easy to anticipate — others, not so obvious. Either way, the dollars add up. For everyday and long-term budgeting purposes, here are some expenses you may need to consider when counting the cost of homeownership. (See also: Twelve Ways to Become Rent or Mortgage Free)
Unavoidable expenses that will probably last forever
Property taxes were added to my mortgage payment (and held in escrow) so I have been aware of this expense for a while. Unlike my mortgage loan, which I paid off, taxes stay around forever. According to the Tax Foundation, the average property tax bill in the U.S. is $1897 per year (or $158 per month) on a median home value of $197,600. See Myscha's article on ways to save on property taxes for eligible homeowners; also, property taxes are generally deductible from income tax so you'll reap savings in other areas.
Homeowners insurance was included in my monthly payment and, likewise, is not a surprise. Rates depend on factors such as the value of the house, type of coverage, and deductible. This expense can easily cost $50-$100 or more each month and also does not disappear like the mortgage eventually will. Even as a renter, you'll likely want to insure your belongings so the true cost of homeownership in this category will be the difference between renters and homeowners rates; save by installing safety features (deadbolt locks and security systems), raising your deductible, and/or combining your home policy with your auto policy.
Homeowners Association (HOA) dues are not something I pay though these can run $100 per month, more or less, depending on services provided to homeowners, such as security, common area maintenance, and lawn upkeep. Dues may not include periodic assessments for capital improvements or major projects.
Mission-critical expenses that keep your home livable
Repair, maintenance, and replacement of heating and air conditioning systems can run a couple of hundred dollars each year for basic maintenance to several thousand dollars for system replacement. Our system is nearing the end of its life, so I need to start setting aside at least $250 each month for the next few years. For homeowners with newer systems, consider saving about $80 monthly in anticipation of a future replacement. (See also: 5 Household Fixes You Should Stop Paying Others For)
Roof replacement should probably happen every 15-30 years and may cost several thousand dollars each time. Budget about $25 per month if you've got a brand new roof, and more if you are closer to the replacement time.
Exterior door replacement can range from the simple to the wildly complicated, from swapping out a new slab with the existing one for a few hundred dollars to replacing the entire system for the front entrance, which can cost several thousand dollars. Basement doors and side entrance doors with or without storm doors, specialty hardware, and deadbolt locks can add to the total cost of exterior doors. If you intend to replace a few doors every 15 years, save at least $5 per month.
Tree removal is not something I had considered when we bought our house, especially since my husband and I liked the abundance of trees in our neighborhood. But, when we found out that our pine trees were diseased, we needed to take them down rather than allow them to fall randomly and possibly injure someone or damage property. For safety reasons, taking down tall pine trees is not a great do-it-yourself (DIY) project and professional services can charge hundreds of dollars.
Yard work may not seem like a critical function but, trust me, if you don't cut your grass or clean the gutters on a regular basis, bad things are likely to happen. You might find yourself in violation of local ordinances or repairing water damage resulting from clogged gutters and improper drainage. Expenses in this category, even for DIYers, include equipment, tools, and supplies, such as lawnmowers, rakes or leafblowers, clippers, and grass seed. Budget at least $10 each month for general upkeep and more for lawn improvements.
Exterior painting cost me about $2,500 a few years ago. There is one section of the house that is inaccessible without special equipment or we might have painted the house ourselves. We have a part-frame, part-brick exterior so those with all brick will have minimal costs for repainting and those with all-frame much more (I plan to buy all-brick next time). DIYers could lower the cost significantly but a basic budget should run about $10 per month..
Interior decor, even for someone like me with minimal design needs, can cost $10-15 each month for interior painting and window treatments, if you want to freshen things every 10 years or so.
More expenses for repairs and upkeep that you may deem essential or useful
Security systems can cost $30 per month, if you choose to have monitoring services. Options that may be less expensive are a neighborhood watch program or, according to police in my area, a dog in a fenced backyard.
Additional expenses like pest control, driveway paving/repaving, power washing of decks and exteriors, window replacement, plumbing and electrical repairs can add a few to many more dollars each month.
Obviously, you won't actually spend money to replace your HVAC system or buy yard tools every month; but I've divided one-time and periodic costs over useful lives for general budgeting purposes. You can defer some activities and their associated costs (interior painting for example); others may be more urgent (like taking down a tree that is about to fall on yours or a neighbor's house) so that not spending money now can cost much more later.
Buying a new house can help to defer many costs for several years but you'll probably need to make replacements at some point. You can also sell before stuff starts breaking but the life remaining on your roof, HVAC system, etc. will likely be factored in the final sales price.
Homeowership costs, then, go beyond the cost to service the mortgage loan; budget at least 30% of your monthly mortgage payment (principal plus interest only) for taxes, insurance, maintenance, and general upkeep. This budget may be conservative; MySpendingPlan recommends 30-45%. Other experts recommend an alternative approach to estimating homeownership costs: set aside 1% of the value of your home for maintenance each year plus taxes and insurance.