Mortgage Payments Are Just the Start. Here’s What Homeownership Really Costs
The cost of owning a home is soaring, not only because High mortgage rates And raise housing prices. Other housing costs and expenses caught homeowners off guard.
Many families gradually repay their home loans (principal) and Monthly interest. But until this process, they don’t always think about things like property taxes and insurance. “This could derail the financial plan, forcing tough decisions to be too thin or leave the dream house altogether,” he said. VIU by Huba digital insurance platform.
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In recent years, Soaring family insurance premiums and the rising property Tax Thousands of dollars in mortgage payments have been added, making them unbearable. At the same time, the homeowner must also repair, maintain and Utilities In addition to increasing the daily costs of healthcare, parenting, education and recreational activities.
Even if you can afford the upfront cost of buying a home, it is important to know the daily price of home ownership.
Watch the following: The hidden cost of owning a house explains
Why are homes more expensive these days?
Since 2020, the average cost of owning a home has Angry by 26%far exceeding the wage increase during the same period. The average homeowner spends over $20,000 a year to own and maintain a home, which is based on a regular mortgage.
Property taxes, insurance premiums and maintenance costs are the three main factors that make today more expensive and show no signs of reversing the course.
property tax
Home values have surged in recent years, which means a significant increase in property tax bills for millions of homeowners. In 2024, ordinary families in the United States pay $3,018 In annual property taxes, it has increased by 27.4% since 2019.
The fees you pay depend on your local tax rate and the assessed value of your property. Tax rates vary by state and county, usually reassessed every five years or when the property changes hands.
Increased property tax can eventually be offset Rising home net worth. However, it only happens when you decide to sell your home Refinance your mortgage Or use Home equity loan or Family Net Worth Credit. Before that, a rise in property taxes could be a sudden reduction in financial burden on your monthly budget.
Homeowner Insurance
The average monthly insurance payments have increased by 52% since the beginning of 2020, and some households in high-risk areas face 90% during the same period Intercontinental Exchange. Insurance premiums rise in part due to inflation and construction costs and increased risks Hurricane, wildfire, tornado and other destructive events.
The amount you pay depends on a variety of factors, including the location of the property, age and square feet, and the policy you choose.
Annual insurance costs for “low-risk” states such as Hawaii or Vermont are about $500 to $800, much lower than The national average price is $2,258. But in the Florida Hurricane, the average annual premium is about $5,488 and the monthly fee is about $457.
Choosing without insurance coverage can be a devastating burden on homeowners to recover from significant losses. In recent years, more and more private insurance companies have Cut coverage in high-risk areas. For example, state farms removed 69% of the policy in California’s Pacific Palisades, and then devastating wildfires ripped the area, leaving families with a huge financial burden of repairing or rebuilding their homes.
“No coverage, even an unforeseen event, whether it’s storm damage, fire or other expensive events, can affect the financial stability of the household,” Hodges said.
Maintenance and repair
Typically, you can expect to spend 2% of your home value on maintenance and repairs every year. On a $400,000 home, it totals $8,000 a year.
But this number has increased significantly as years of high inflation drives prices for materials, equipment and labor. Average household spending in 2024 $12,050By comparison, it was $8,485 in 2017, according to a new report from home services site Angi.
The same survey also found that 50% of homeowners experienced surprise expenses, increasing the pressure of tight budgets. Extreme weather events such as wildfires, floods and tornados are a growing pain point for homeowners.
For example, average fire damage Recovery cost is $27,175. However, depending on the size of your home and the range of damage, prices can range from $800 to $180,000. This number will be higher if you live in an area where insurance coverage is lost or denied.
Other fees related to home ownership
In addition to property tax and insurance payments, you also need to budget these expenses when purchasing a home:
Close Fee: Close Fee It is a neglected fee that you need to pay when you buy a home. They usually pay the advance payment upfront, but can also be put into practice by “not closing the cost mortgage” (if your lender provides it). Depending on your location, closing costs can be expensive, ranging from 1% to 6% of the purchase price. These fees include home appraisal, transfer of ownership, real estate taxes regarding title transfer, title insurance for new owners (you), title insurance for lenders and initiation fees.
Private mortgage insurance: If you purchase less than 20% of the home, you may have to include private mortgage insurance in your monthly payment. Lenders tend to consider smaller down payments as smaller risk candidates for mortgage loans, while PMI requires protection of lenders in case of default. PMI borrowers are usually 0.5% and 1.5% They average annual loan amounts, borrowing between $30 and $70 per month for $100,000 per month.
Water and electricity bills: Utilities costs have risen rapidly due to inflation. Your exact bill will depend on several factors, including the time of year, your monthly usage, and the location and size of the home. In 2024, the average monthly utility cost in the United States ranges from $500 to $600.
HOA Fees: When you purchase a home with a homeowner association in your community, you will become a member and you will be charged an ongoing quarterly or monthly HOA fee to cover the maintenance and maintenance of shared areas such as sidewalks. Possible HOA Fee Range $100 and $1,000 per monthdepending on where you live.
Internal and external costs: Emergency maintenance or emergency repairs are difficult to anticipate, but the costs associated with ongoing upgrades and aesthetic maintenance are also high.
- Paint work
- Roof repair
- Deck, terrace or pool maintenance
- Floor repair
- insulation
- Electrical and plumbing maintenance or repair
- Mold and/or termite removal
- Heating, ventilation and air conditioning maintenance/installation
- Garden and tree care
- Pest control
- Safety system
- Curtains and lighting
- Leaves and/or snowfall
How your loan term affects your monthly mortgage
this The length of the mortgage Play a role in your interest rates and monthly mortgage loan payments. Shorter term loans usually have lower interest rates but higher monthly payments because you pay them off in a shorter time. Long-term loans can benefit from lower monthly payments, but over time you will pay more interest.
Even if you have a fixed-rate loan, your payment will still fluctuate. That’s because lenders usually bundle your homeowner insurance and property tax (variable costs) into payments.
How your down payment affects your monthly mortgage
higher down payment Meaning you will have less loans, which will lower your monthly mortgage payments and help you save interest in the long run. A higher down payment also means you will get higher interest rates, as lenders usually offer the lowest interest rates to lower risk borrowers. If you do one Smaller down paymentYou may need to pay Private mortgage insurance To help offset the additional risks of lenders’ assumptions.
Tips for buying a house in 2025
Once you are confident you want to buy a home, start learning about home price trends. Don’t rush to see the house or Real estate agent fine.
In addition to making the most of your savings and creating a home purchase budget, here are some extra steps to ensure you are in a good position.
- Make your honor: Check your credit report and consider how to improve your score over the next six to 12 months. If you take on a lot of debt on your credit card, focus on paying them to improve your score.
- Seek down payment assistance: If you are a low-income or middle-income borrower, you can get help from the state or local housing bureau. First time home buyers can also explore Make the process more affordable.
- Lock you speed: Interest rates keep moving up and down. Lenders’ mortgage today may give you a 6.5% tax rate, but the agreement could turn into 7% next week. If you see a rate that looks particularly attractive, lock it so you don’t slip away.
