The Costs of Homeownership & How to Save on Your Monthly Bills

When renters begin considering the possibility of buying a home, they often think about doing so as a way to get something back for the money they are spending each month on rent. While this idea is an important one, these prospective buyers may not be considering the total cost of home ownership.

What are the Additional Costs of Home Ownership? 

Along with the amount of the mortgage and interest payments, homeowners must also cover several other costs associated with owning a home. These include both monthly and annual costs, such as:

  • insurance premiums, including homeowners insurance, flood insurance (if applicable), and any specific coverage needed, such as liability coverage for a home-based business
  • additional costs related to the financing, such as private mortgage insurance premiums
  • monthly utility costs, including heat, air conditioning, electricity, water, and sewer service
  • routine maintenance costs to maintain systems in the home 
  • the costs of any repairs or renovations needed 
  • property taxes, including county and city taxes 
  • the costs for any special assessments or fees, such as homeowners' association fees, utility assessments, etc. 
  • the cost to maintain or replace necessary appliances, such as cooking and food storage appliances, laundry appliances, etc. 

Renters who decide to purchase a home without considering these additional costs often find themselves blindsided by emergency repair bills that would have previously been their landlord's responsibility. 

How can Prospective Buyers Avoid Purchasing an Unaffordable Home?

Home buyers who want to reduce or control many of the additional costs of owning have an excellent opportunity to do so during the home buying process. In most cases, many of these costs associated with a particular home can be researched prior to making an offer on the home, giving the prospective buyers the information they need to decide if the home will be affordable for them in their expected financial situation.

In order to find out about these costs for a particular home, prospective buyers should start by requesting seller disclosure documents, average utility costs, and recent tax and insurance information. 

Tips for an Affordable Experience

Making the recurring costs of homeownership more affordable begins with avoiding or eliminating those that are unnecessary. Buyers who want to enjoy the lowest possible recurring home ownership costs can do so by: 

  • eliminating any homes from consideration that require expensive flood insurance or have some type of unique feature or location that results in a higher than average homeowners insurance premium
  • looking for homes in areas where the tax rates are more reasonable 
  • avoiding homes covered by a homeowners' association 
  • saving up to put at least twenty percent down on the home purchase to avoid the need for private mortgage insurance premiums
  • choosing a home that is newer or has been well-maintained to avoid as many potential repair and maintenance costs as possible
  • making sure they have enough savings to cover unexpected home repairs or appliance failures
  • searching out homes that offer updated appliances 
  • searching for homes that feature high efficiency heating and air conditioning systems and optimal insulation values for more economical utility costs after the purchase

Prospective buyers who want to enjoy an affordable living experience after their purchase should always begin by discussing their situation with their real estate professional. Their agent can use their knowledge of the market area to help them streamline their search and more easily locate the best possible homes for them to consider. In addition, the agent will be able to help them locate specific information about each home so that they can feel comfortable that they have made the best possible choice.