17 Homeowner Expenses (Besides Your Mortgage) That You Should Budget For
You’ve spent months — years even — saving up for a down payment for a house. You’ve budgeted meticulously, banking savings whenever you could to make homeownership possible.
After reaching that goal, you may feel like the pressure to budget and save is gone. But don’t get too comfortable.
17 Hidden (But Typical) Homeowner Expenses
When you purchase a home, it’s not just the monthly mortgage payment or down payment you need to think about. Here are 17 additional expenses to consider — ranging from property taxes to homeowners insurance to maintenance and repair costs.
1. Property Taxes
Property tax information is a public record, so you can look up how much previous owners were taxed in the past. However, keep in mind taxes can fluctuate from year to year as home values and millage rates change.
2. Homeowners Insurance
Homeowners insurance generally protects against losses or damages to your home and belongings, plus liability coverage for accidents that may occur on your property. What your homeowners insurance covers will differ based on your policy — as will the cost.
Like taxes, homeowners insurance is often folded in your mortgage and held in an escrow account. If not, you’ll want to divide your annual insurance bill by 12 and put that amount aside monthly.
3. Private Mortgage Insurance
If you’re getting a conventional mortgage – as in not an FHA loan or VA loan – you’ll have to pay private mortgage insurance (PMI) if your down payment is less than 20% of the purchase price. This insurance is to protect the lender in case you stop making payments.
PMI usually costs 0.22% – 2.25% of your mortgage. You don’t have to pay it for the life of your mortgage, in most cases, though. Once you’ve made enough mortgage payments to build at least 20% equity in the home, PMI can be removed.
Payments are due monthly and are factored into your mortgage payments.
4. Mortgage Insurance Premiums
If you have an FHA loan, you won’t pay PMI, but you will have to pay mortgage insurance premiums. There are two types of premiums:
- Upfront mortgage insurance premium (UFMIP).
- Mortgage insurance premium (MIP).
The UFMIP is 1.75% of your loan amount, and has to be paid upfront. You can do this in one of two ways. The first is to just pay it as a closing cost if you’ve got the cash on hand. The other is to add it to the cost of your loan, which will cause your monthly payments to rise.
MIPs can cost 0.45% – 1.05% of your total loan amount for the year, and you’ll pay them every single month. You’ll pay these monthly premiums for at least 11 years of your loan. If your original down payment was less than 10%, you’ll have to pay MIP on a monthly basis throughout the life of your loan.
5. Title Insurance
When someone sells you a house, they have to legally have the right to sell it. Otherwise you could have legal issues down the road.
Title insurance companies research the ownership of the house, looking for things like liens, levies, undisclosed heirs, and any other potential problems with the title. If their search turns up nothing, they’ll issue an insurance policy to protect your financial interests in case there was something they didn’t catch.
Whether or not you’re required to get title insurance varies by state. Some states require you to have it in all circumstances, others waive it if you pay in cash, and still others don’t require the owners to purchase this insurance at all.
Title insurance costs – on average – $1,000 per policy. But that number’s going to change dramatically depending on the state and the purchase price.
6. Flood Insurance
Tired of hearing about insurance policies?
We’re not done yet! Believe it or not, after all those insurance policies, not one of them protects your home against flooding. Technically, there’s no law requiring you to purchase flood insurance. You’re technically allowed to cross your fingers and hope you’ll never need it.
But if you live in a flood plain, odds are pretty high that your lender will require you to purchase a policy. You can check if a property is located in a flood plain here.
Flood insurance premiums are $82/month on average, but it’s going to vary depending on the risk of your particular property.
7. Maintenance Costs
Though you may not have to save as aggressively as when you were trying to come up with a down payment, personal finance experts suggest homeowners save about 1% to 2% of their home value each year for maintenance and repairs. Think about things like the:
- HVAC system.
- Plumbing system.
- Electrical system.
If your home is worth $300,000, for example, you should be saving about $3,000 to $6,000 a year for future expenses — which breaks down to $250 to $500 a month.
A good place to keep these funds is in a high-yield savings account or money market account. You may not dip into these savings every year, but you’ll want to easily access this money when something needs fixing.
Alternatively, you could purchase a home warranty, which covers repairs to certain systems and appliances, like your HVAC system or your fridge. Weigh the costs of the warranty (plus any related service fees) against how much you would save on your own for future repairs
You’ve probably been used to paying utilities as a renter, but you may find your expenses are greater once you move into your new home — especially if your square footage is significantly larger.
If any utility costs were previously folded into your rent payment, be prepared for separate bills. For example, a lot of rentals include water and sewage bills rolled into the rent. Your landlord pays them, so you don’t have to worry about them.
As a homeowner, those costs will fall on you every month.
If you live in one of 16 states (plus Washington, D.C.,) you have some type of deregulation in your energy market. That means you can shop around for the lowest rate on your utility bills.
9. HOA Fees or Condo Fees
If you live in a condo or neighborhood with a homeowners association, budget for the cost of HOA or condo fees. These fees are collected to cover expenses related to shared amenities, common space, neighborhood aesthetics and security.
These fees vary, but they can tack on a couple hundred dollars to your monthly housing expenses.
If you pay your fees once a year, set up a sinking fund and save up each month.
10. Pest Control
Gone are the days when you’d just call your rental office if you found ants invading your kitchen. Now that lovely task is on your plate.
You could go the do-it-yourself route and purchase pesticides, barrier treatments or traps from a home improvement store. But if there’s a family of rodents in your attic, you may want to call in the professionals. Pest control companies have expertise and more effective extermination solutions than what you can buy at the store.
Shop around for quotes from different companies to get the best deal. Many offer contracts for preventative maintenance if you want your home treated regularly.
Mold is not one of those issues you’ll want to put off until later. It’s one of those problems that can cause major health issues.
Mold can be an extremely expensive problem to fix, depending on how long it takes you to catch it. It can spread easily through your home’s HVAC system, which means the difference between needing to clean and repair one part of your home, and needing to clean and repair the entire home.
Landscaping is a task you’ll want to decide whether to do yourself or outsource. If you’re hiring a lawn care company, be sure to shop around for the best prices.
If you go the DIY route, factor the cost of equipment and supplies in your budget. Some equipment may also include ongoing costs, like buying gas for your mower.
While lawn care may seem like an aesthetic thing, your city— or HOA — likely has rules and regulations regarding maintenance. You could get fined for letting your grass grow too high.
13. Cleaning Services
Yes, you had to clean your rental. But odds are your square footage has gone up. The more square footage, the more time you need to dedicate to scrubbing, dusting, and vacuuming.
It’s OK to outsource cleaning services if you need them, the same way it’s okay to outsource landscaping costs. Services are cheaper than you may imagine, but they’re still going to be an additional expense in your monthly budget.
If you fall in love with your soon-to-be home’s fridge because it’s got a built-in ice maker, be sure to ask if the appliance is actually included in the home purchase.
Things like a fridge, oven, dishwasher, and washer and dryer are high-ticket items, and the current owner may plan to take them with them. If that’s the case, you’ll want to make sure to budget in money to buy your own.
You should always be setting aside a little money to save up for maintenance and repairs on these items, too.
If you’re buying a fixer-upper, you’re going to need a budget for renovations. There are fixer-upper loans which give you more money than you need for the mortgage, paying you the excess cash based on your renovation schedule.
If you don’t get one of these loans, you’re going to need to float the renovation costs yourself or put them off. Putting it off might be an okay solution if you want to tear down a wall to let more light into your living space.
But it might not make sense if the glass in every window pane is broken, or the electrical system is hazardous in its current state.
16. Security Systems and Locksmiths
A security system is optional, but it’s an expense you may consider once you move into your own home. Your house is a major asset and you’ll want to protect it — along with your family and belongings.
When considering security systems, budget for the initial cost of buying and installing the system, plus the monthly cost for monitoring.
At the bare minimum, when you move into a new house, you’ll want to pay to get all the locks changed.
Concerned about safety? Here are the 10 safest metros in the U.S.
17. Reductions in Home Value
We like to think our home value will only ever go up, but that’s not always the case. Think 2008. There is a housing market correction currently happening that’s expected to continue throughout 2023, but that correction isn’t likely to put people upside down on their home loans like it did in 2008.
Another way you can experience a significant reduction in home value is if you buy your place for the view, but then future construction builds up between you and your scenic surroundings, blocking that view. Situations like this can lower your home value, which can ultimately lower your net worth.
Homeownership Expenses FAQs
Monthly housing expenses can include a range of products in addition to your mortgage. Things like insurance premiums, utilities, home maintenance expenses, and property taxes all contribute to your monthly housing expenses.
After you purchase a home, recurring monthly expenses can include:
- Property taxes.
- Some type of mortgage insurance if you paid less than 20% down.
- Savings for home maintenance and repairs.
- Homeowners insurance.
- Flood insurance.
- HOA or condo fees.
- Landscaping and cleaning services.
According to Fannie Mae, the largest homeowner expenses are:
- Property taxes.
- Home improvement expenses.
When you budget for buying a house, keep in mind that you’ll need more than a 20% downpayment. You’ll also need money for closing costs, various insurance policies, home maintenance and repairs, HOA fees or condo fees, and property taxes.
Ideally, you’ll have a 20% down payment when you purchase a home. You’ll also want to save 3% – 6% of the loan amount for closing costs. As you pay off the mortgage, you’ll want to save 1% – 2% of the home’s value each year for maintenance expenses and repairs. Don’t forget to factor in the costs of various insurance policies when you own a home, too!
When you own your own home, there are little things that feel big – like being able to choose your own paint colors, or not being subject to a landlord’s pet policies.
But there are big things, too. Most Americans’ wealth is tied primarily to home ownership. If you pay off your mortgage, you can dramatically lower your monthly housing expenses. Or, if you need a huge infusion of cash in the future, you can borrow against the equity in your home.
It’s generally recommended to save at least 1% – 2% of your home’s value for home repairs and maintenance costs every year.
Former senior writer Nicole Dow contributed to this report.