As the cost of buying a home continues to rise in the U.S., it is crucial to recognize that the expenses associated with keeping and maintaining a home have also increased significantly. A recent report by Bankrate.com reveals that the “hidden costs” of homeownership amount to an average of $18,118 annually, equivalent to $1,510 a month. These costs encompass property taxes, homeowners insurance, electricity, internet, cable bills, and home maintenance, estimated at 2% of a home’s value each year.
Comparing the current national average of $18,118 with four years ago, where the expenses totaled $14,428 annually, a 26% increase is evident. Jeff Ostrowski from Bankrate.com emphasizes the importance of understanding that buying a home involves more than just a mortgage payment. Additional costs must be taken into account when planning how to cover all financial obligations linked to homeownership.
One aspect that often catches new homeowners off guard is the maintenance and repair costs associated with owning a home. Jessica Lautz, from the National Association of Realtors, points out that due to the lack of new home construction, many purchased homes are older, requiring various upgrades and repairs. The median age of owner-occupied homes in the U.S. is approximately 40 years, indicating a need for system upgrades such as HVAC units, windows, and doors.
Routine maintenance such as replacing a roof, vinyl siding, and other essential components can be quite expensive. Angi.com suggests that roofs last about 30 years on average, while vinyl siding can endure three to four decades. These costs accumulate rapidly and can catch homeowners by surprise if they are not adequately prepared to cover these repairs and replacements when needed.
First-time homebuyers often underestimate the ongoing costs of maintenance and repairs, viewing them as part of the learning curve of homeownership. Spending the entire reserve of savings on a down payment can lead to being “house poor,” where there are insufficient funds left for essential repairs and maintenance. This could result in accumulating credit card debt or resorting to high-interest loans to cover unexpected expenses.
In recent years, some homebuyers have opted to waive home inspections to make their offers more competitive in a tight market. However, Jeff Ostrowski warns that this decision can be risky, as an inspection provides valuable insights into the condition of the property and potential maintenance issues. Waiving the inspection increases the likelihood of unforeseen costs arising after the purchase, putting homeowners at financial risk.
Understanding the true cost of homeownership goes beyond the initial purchase price of a property. It involves careful consideration of ongoing expenses, including maintenance, repairs, and replacements, to ensure financial stability as a homeowner. Being prepared for unexpected costs and valuing the importance of home inspections can help mitigate risks and safeguard against future financial challenges in homeownership.