The Surprising Costs of Homeownership

homeownership house

Many, if not most, people in the United States desire to own a home. However, many first-time home buyers don’t anticipate all the expenses related to home ownership. As a real estate professional, I have witnessed this first-hand. The excitement of new home ownership can be quickly dampened by the slew of costs that come along with this exciting adventure.

When my wife and I purchased our first home, we experienced this same phenomenon. Not that we have any regrets about buying our house—it has been one of the best decisions, financial or otherwise, that we have made. But I must admit, many of the costs did catch us off guard.

By being prepared and anticipating these expenses in advance, you can help ensure that your home remains a blessing rather than becoming a curse. Let’s explore some of those costs.

Closing Costs

Unfortunately, some of the costs of home ownership show up even before you technically own the home. These include costs related to the mortgage and the proper execution of the closing. Collectively, these are called closing costs.

So, what exactly are closing costs?

Closing refers to everything involved with finalizing the sale of a home between the buyer and seller. This includes paying the attorneys who conduct title searches, prepare the deed, and oversee the closing itself. It also covers compensating the lender involved in making the loan. Finally, closing costs include paying or prepaying any property taxes or insurance involved with the sale.

How much are they? Rocket Mortgage reports that closing costs can add up to as much as 3-6% of the total cost of a loan.

To prepare for these expenses, ask your lender as early as possible for a loan estimate. This is a document that will outline your projected payment as well as the estimated costs at closing.

Replacement costs 

Once you own the home, that’s when the real fun begins.

Some of the largest, most expensive items in a home can be the most easily overlooked. Items like the roof and HVAC systems may not jump out to the first-time homebuyer, but they are vital to consider. Like all physical items, these systems have a lifecycle. It’s important to establish where they are on that timeline when you purchase your home.

For instance, the average roof lasts 15 to 20 years and costs $5,600 to $12,200 to replace. If the roof is fifteen years old when you purchase the home, it is likely you will need a new one soon. Likewise, the average air conditioner costs $7,000 to replace and can be expected to last 12-15 years. Other big-ticket items include furnaces, water heaters, and septic systems (for some homes).

Keep in mind that you never know when one of these large systems won’t last its entire expected lifecycle. When we purchased our first home, the air conditioner was only nine years old. We figured to get several more years out of it. Unfortunately, after just six months, the unit went kaput, and we had to pony up. We either had to buy a new unit or let my wife and two toddlers sweat out the Kentucky summer. We chose the latter option.

The key to being aware of potential large, upcoming expenses is to get a thorough home inspection prior to buying the house. Assess the age and expected remaining life of each system and make sure you have the cash put away to cover repair or replacement when needed.

Maintenance costs

Owning a home means maintaining the house itself, but it also means maintaining the property around it. Driveways, sidewalks, decks and fences don’t always catch the attention of starry-eyed home shoppers, but they are part of the property and may be a big source of maintenance.

During the first two years in our new home, my wife and I paid $600 to have our blacktop driveway resealed (recommended every 2 to 3 years) and paid several thousand dollars to rebuild and stain our wooden backyard fence. In the near future, our kids’ wooden playset and backyard storage shed are due to receive some attention. These are items that didn’t necessarily catch our eyes during the home search, but as we’ve lived here day in and day out, their need for maintenance has become more apparent.

When you are financially ready, owning a home can be a great financial move. Homeownership provides benefits far beyond just money. But most first-time homeowners don’t fully understand all the costs when they sign on that dotted line.

Plan in advance for how you will handle all the expenses involved with homeownership, and your house will be a blessing for many years to come.

About the author: Jordan Hall is a (reformed) attorney, real estate broker, and entrepreneur. He wrote the book, Every Degree Debt Free, about his experiences paying for law school without loans. Today, he no longer practices law but helps folks build wealth so that they can live their purpose and leave a legacy. He is also a French fry connoisseur.