8 Hidden Costs of Home Ownership

Owning a home has always been a part of the American dream. It’s something that we fantasize about when we’re young, something we scrimp and save for, and quite frankly, something we end up paying for, for the rest of our lives. Aside from the home mortgage, it seems owning a home is more expensive than we thought.

Leaky pipes and infestations are sudden home expenses to watch out for, and maintaining and repairing can prove to be not only a daunting task, but also a very expensive one. There are also other expenses that suddenly pop up, things that we don’t even think. So before you look at moving companies you may want to look at these hidden costs.

In order to prepare yourself for the potential expenses in home ownership, below are some of the hidden costs of having a home.

1 . Property Tax

Taxes have always been a pain in the butt, and there’s no exception when it comes to owning a home. People who have a mortgage on their home usually have their property taxes in escrow. This allows your to pay your mortgage and set aside money for property taxes. But, if you do not escrow your taxes. You can prepare yourself by checking the annual property tax and dividing it by 12 so you can add it to your estimated monthly expenses. The information can usually be found in an MLS listing. Also, remember that taxes are most likely to keep going up every year so make sure you have an allowance to your budget if this happens.

2. Insurance

It costs a whole lot more to insure a house as compared to a 1-bedroom apartment. So even if you paid for renter’s insurance, you better be prepared to increase your insurance budget. One thing to consider is that an older home may cost more to insure because the heating, electric, and plumbing are older, thus more prone to damage. Insurance companies can also check your credit record and raise their rates based on your credit score.

3. Home Owners Association (HOA) Fees

Houses that are in a subdivision may have to deal with HOA and their fees. This is also applicable to condominium units. These fees are a charge to use and maintain the shared public areas such as the community clubhouse, play grounds, pool, and grounds keeping.

4. Appearance

The moment we purchase a new house, the next thing we think about is what furniture would look great in it, what interior decorating, what appliances etc. Of course since it is YOUR house, you would like it to reflect your style and taste especially when the guests arrive. Besides, who wants to live in a ratty looking home? And there goes the paved walkway, the landscaping, the new patio, and the shutters. All pretty expensive.

5. Maintenance 

We all know how detrimental to our budget major repairs are, so instead of predisposing ourselves to the danger of heavy repairs, it’s important to maintain the stability of all areas of the home. Of course, this includes cleaning the gutters, sealing the doors, fixing plumbing leaks, reinforcing the roof, and many more.

6. Utilities

You may have come across an apartment where heating and water was included in the monthly rent. This time, you will have to shoulder these utilities. There can be nothing more expensive than electric and or gas bills, and the cost of energy is continuing to rise day by day. In order to prepare yourself on the cost of utilities, request the previous home owner to show you a copy of their utility bills for the past 12 months so you can get an accurate picture of how much you expect to spend through all the four seasons.

7. Repairs

Repairs can make a new home owner long for the good old days when you used to rent. Each major system in the home such as plumbing, electric, heating, roofing, etc. are crucial to making a functional home. Also, everything has to be kept in good working order to protect your investment, and keep your life running smoothly. Remember, there’s no landlord to call in times of emergencies.

8. Safety

From repairing the deck rails to installing a burglar alarm system, adding motion-detector lights or adding more lighting to your exterior, those extra security measures will certainly empty your pockets.   Despite these hidden costs, there are still many advantages towards owning your own home.

Just make sure that before you go into a home mortgage, really do your due diligence in terms of your budget and how much you can realistically afford. Also, take into account your soon growing family and if you plan to move to a larger home when the time comes.



  • You nailed them! Another to think about under Insurance, is the liabity a property owner assumes. Make sure you are covered if a kid (or anyone) wanders onto your property and hurts themselves – especially if you have what is considered an 'attractive nuisance'. Things like a swimming pool, trampoline or playyard set that might entice someone onto your property are what I mean by attractive nuisance. Umbrella liability insurance is not terribly expensive and can cover you over and above what your homeowner's policy covers.

  • Very thorough coverage of home ownership! Then comes the kids, then the family pet, then college…..oh my!

  • I hate the property tax aspect of home ownership. My tax has been going up every year thus increasing my monthly mortgage payments. There seems to be a big flaw in calculating property tax but not much we can do about it besides writing letters. Also, be prepared to turn yourself into a handy person as you will be making many repairs in maintaining the house.

  • I find appearance to be the big kicker because it is subjective. One person can say something looks crappy while the other says it looks good. My hubby and I squabble about this all of the time. I always want to freshen things up. It all costs money though so being patient is key.

  • 8 Hidden Costs of Home Ownership | Your Finances Simplified…

    Owning a home has always been a part of the American dream. It’s something that we fantasize about when we’re young, something we scrimp and save for, and…

  • A house is a liability, yes. And this is a very good list. Appearances have to be done for one's sake – I have never met any one who bought a house and didn't at least re-decorate it. Bathrooms and kitchens are important but best kept along classical lines – like the 'little black dress'.

    Bur whya are these expenses 'hidden'? I would have thought they are pretty obvious.

  • YFS /

    Good catch on the umbrella policy. They aren't expensive but sometimes they come with stipulations as higher coverage limits for home/auto and lower deductibles.

    Do you have an umbrella policy? Did it come with any additional requirements prior to allowing coverage?

  • YFS /

    My order was a bit different. I had Home, family pet, (not yet) kids and very far off college 🙂

  • YFS /

    Property tax and the subsequent "deduction" are the biggest scams. I pay 5k a year in taxes regardless of my home's value. Property taxes will go up fast on high real estate prices but seem to be real sticky on the way down. I'm still paying property taxes based on 2008 value. Why? All they do is increase the multiplier or rate if they decrease assessed value.

    Where you successful in fighting your tax appraisal?

  • YFS /

    You're right. I'm assuming you're freshing things up because you want to sell. I am also assuming you have had your home for quite some time. In that instance, I stick with neutral colors and upgrades that work well for my neighborhood.

    Can you share your most recent update?

  • YFS /

    It's hidden because people never think of this. I know a lot of people who didn't figure their taxes into their ownership cost, who forget about increasing HOA fee's and who most certainly don't put in a furniture budget.

    Did you have money saved for furniture when you purchased your home?

  • I lived in a condo for 5 years and the monthly fees on the condo were $140 when I left and steadily going up. It was a complete rip off which is why I sold it and moved into a house. I do love having my own home but yes there are many expenses that can come up during home ownership that aren't exactly fun!

  • Property tax is where cities will look to raise revenue. You do not escape this exposure in a rental either. The owner will pass this cost on to the tenant.

  • YFS /

    Condo fees are rediculous! I've seen some go up 20% a year and I've seen some stay the same. It's really a mixed bag on your condo fees. I would never ever ever buy a condo. It's for the reason of condo fees. I live in a neighborhood with HOA fees and my fees have not risen at all. Mainly because I live in an area with Single Family homes.

    Aside from Condo fee's did you have any other expenses that bothered you?

  • YFS /

    Great observation. But, rent tends to usually get capped by other factors. For example, in the boom property taxes shot up but rent didn't shoot up at the same rate. Why? Because, wages are factored into the rent equation. So, even though property taxes go up, the cost of a home may go up, rent is always tied to wages of the area.

    What are your thoughts on this?

  • Yes it was a huge waste and that was a huge lesson learned. I will never buy anything other than a single family home again! The condos were cheaply made and another problem w/ that place was there was crappy windows so my a/c & heating bills were always outrageous. There were several other things about that place I hated, not relating to money, my neighbor upstairs was always REALLY loud. There were several nights during the week I would get woke up by her at 2 or 3 am. It was annoying, I was so glad to be out of there!

  • As a former landlord, that is partially true. Apartment rent can be differentiated by size, decor and amenities. Taxes (in California) is based on price. Price is determined by income. Years ago, I was able to increase rent artificially by reducing the security deposit, but raising the rent. Most of the applicants were thrilled with the lower upfront money requirement and were willing to pay the higher rent. I broke even if they stayed one year. Of course I asked for a year's lease. It was an easy way of increasing the value of the property.

  • YFS /

    Ouch… I agree.. Condo's are glorified apartment in my eyes. I rank home buying from greatest to least greatest.

    Single Family (.25 acre or more), Single Family Attached, Townhouse, Condo.

    I will only purchase the first 2.

    In your condo was there any recourse for a loud and noisy neighbor?

  • YFS /

    Hmm… you just gave a great way of increasing rents! Thanks Krants

  • You have hit the nail on the head with these extra costs of home ownership. At times, I wonder if it is really worth it all, but I am reminded that I will eventually be able to stop paying a mortgage whereas tenants will pay until they die.

  • Tessa /

    These are the reasons I am still renting. But man do I miss not being able to paint my walls!!

  • YFS /

    You can paint your walls.. just paint them back before you leave lol :-).

    Is this really a reason you miss home ownership? Also, why don't you own a home anymore?

  • YFS /

    Yes, this is a good reason to own a home. Home ownership is long term. So you have to look at the 15+ year time frame when buying a home. Most people won't recoup the selling fees let allow the hidden cost if you do not own your home for at least 15 years.

  • Technically…economists would say that home prices are reduced at the time of purchase to include the cost of property taxes. High tax areas tend to have much lower asking prices.

    …but it is very wise to point all this out. It is easy to say renting is throwing your money away because their is no equity, but you are also forgoing a lot of time on maintenance.

  • This is a great list, I especially like the one about "appearance" because that's probably the least obvious one. When you're renting, you could care less about the aesthetics of the property, but once you buy a house..it's a whole different story!

    HOA fees also tend to increase every year.

  • YFS /

    I'm not sure that housing prices are reduced by taxes. I think most people think taxes are apart of the house process now. I don't think renting is throwing away money. Renting makes sense in some scenario's just like purchasing a home makes sense if you plan to be in the home longer than 10 years.

  • YFS /

    Good observation, but do you really think renters don't care what the place looks like?

  • Hrm, maybe I should rephrase that. I would be quick to judge if I said that renters don't care what the place looks like, I guess what I mean is that they won't go the extra mile to make sure everything is in top notch condition. I remember when I was renting an apartment, I knew I would only be there for a year, so I never took the time to buy nice furniture and furnishings.

  • YFS /

    Gotcha.. see that's why I'm a firm believer in 2 year leases.. (if I can get them). It cost so much to prepare a house for another tenant.

  • Andrea /

    If I could give every young person out there a shake and make them read this post before buying I would. You nailed it with appearance and maintenance. With the appearance part, when you first move in and are showing your friends and family around it is so incredibly hard not to give in to the consumerism-pressure of having everything furnished and decorated nicely (or maybe I'm just weak :p) Eck. Although, I am happy I bought a house as young as I did, I have learned so much these past few years!

  • YFS /

    I couldn't stand when my friends who bought a house during the boom had house warming and they would have their crappy furniture on display. I just kept thinking.. "When I buy a house I'm saving for furniture" That's what I did. I went a bit overboard but, I saved every penny for it.

    What other lessons did you learn over the years?

  • Haha that's funny. I used to buy furniture @ Ikea, until I realized how cheap it was =(

  • If this was Reddit, I would upvote your comment!

  • YFS /

    They have really really nice stuff. But, you need to pick the quality stuff if you're moving into a "exclusive" neighborhood in a gated community. Your crappy furniture from college isn't appropriate. I know people who couldn't even get window coverings. You're in a mini mansion and can't cover the windows? Planning fail.

  • For young people, I find the "appearance" factor to be the real back breaker. The other things were fairly straight forward for me, but the lifestyle inflation that comes with owning a home can quickly cripple young (or old for that matter) people. Once your finances have been stretched to their breaking point by a mortgage (just wait till mortgage rates go up in a couple years) it is too easy to get that really nice couch that is on sale and put it on credit! Now you have to start entertaining people to show everything off… It's a dangerous spiral.

  • When I acquired the building, it was one third vacant and I had to think of some thing fast to fill it up. Part of the deal was an income guarantee for one month. I had one month to fill it up. I relied on my math/accounting ability to devise a scheme to overcome this problem. It worked very well.

  • YFS /

    Great points. This is why I think a mortgage should be no more than 25% of your net income. Your fixed expenses should be no more than 50% of your net income. This allows you to save 30% and have fun with 20%. If everyone lived by my way life would be better. But then again.. no one would need financial advice.

    I don't think owning a home triggers lifestyle inflation I think it's the company you keep or the people you admire that might trigger it. if you do not have discipline it's easy to get sucked into the joneses game regardless if you own your own or not.

  • YFS /

    Were any of your tenants receiving governemnt assistance or help with their rent? I only rent to section 8 tenants at the moment. They tend to be long term tenants but what is effecting my bottom line is the annual section 8 inspections that make me fix random shit that my tenants break. I can either charge my tenant or increase rents.

    My tenants are already strapped, hence the reason why section 8 pays their rent. So I was thinking of a annual 5% increase in rents.

    What are you thoughts on annual rent increases?

  • I did accept section 8 tenants, however I traded (1031 exchange) before I hit the annual inspection. I have not owned income property in 20 years.

  • YFS /

    Gotcha.. 1031 exchange is not in plans for me. I need 3 years before I break even on upfront costs with each property. Thank you for helping me identify a way to get a little more rent up front. The security deposit I currently take is 1 month rent. That is nothing compared with what a tenant can do to your property. Suing them for the difference is a waist of time. These people don't have substantial asset or income. If they did they wouldn't rent from me or be on section 8. For my next property I will try your method. Half the security deposit and bump up my rent by 50 dollars per month.

  • Andrea /

    I bought my house on a whim when I was 22, I'm not sure it's realistic to save for (nice) furniture, a down-payment, initial maintenance costs as well as closing costs at such a young age unless you are one of the very few that actually make good decisions and plan for that in the years up to that or come from wealth. Most people are still going to university/college at that point. (Hey, I'm STILL going to university… lol)

    Also, who is it that minds how your house is decorated? If you are happy and comfortable and, your house is kept in shape and you are not living on things with holes and stains, isn't 'nice' furniture for the sake of nice furniture just keeping up with the joneses?

    I learned that houses deteriorate very fast when not maintained properly, I learned that before you buy a house there are ALWAYS hidden things you will find out after you move in and get-to-know the house that even with a thorough inspection aren't always noticed. It all costs $$$ and you really need a house fund beyond the initial downpayment, closing costs and even furniture-fund if you buy a 'used' house.

    Also, apparently there are some insurance clauses in home insurance that require you to modify your insurance if you change them. E.g my heating system, I was unaware that I had to install a different heating source BEFORE installing my woodstove instead of the other way around. The only way to know that? Read the entire policy with a finetoothed comb, front to back; my new policy for all documents I receive.

  • Andrea /

    Isn't that the issue we're facing now though? Outside of this PF community it's fairly normal to keep up with the joneses, in a world filled with consumerism. Yes, there are many people out there that resist lifestyle inflation… but I don't feel that's the norm anymore these days?

  • YFS /

    I bought my house at 24 and I was able to have 1 year emergency fund, down payment, furniture budget and I paid for a fairly expensive wedding in cash 6 month's prior. I do not come from wealth. Hell I wish! This was not easy to do, but when you're completing a 500k deal you should plan for everything.

    I do not believe having appropriate furniture for your home is keeping up with the jonses. My comment is referring to people who went out and bought a 5 bed room mini mansion and could not furnish the home. I know several people who did this and it pissed me off. It pissed me off because they are my friends and I warned them ahead of time that you need to have money to decorate. So, when you say "who minds how your house is decorated" that doesn't apply to them. Because, they are still complaining about it.

    I went from 1 bedroom 900 sqft apartment to a 5bed 4.5 bath 5k sq ft home. A furniture budget was necessary. No way to get around it.

  • YFS /

    I agree.. it's weird because financial advice is similar to fitness advice. You know what you're supposed to do to get better but people still eat what they want. Then complain later about why they're fat and out of shape.

  • Andrea /

    Yes, so essentially we agree. Not planning = stupid. Trying to do things anyway without appropriate planning = just as stupid.

  • I'd agree that reducing asking prices by taxes is a loose concept, but it is a true concept. In general, everyone takes the future costs and expenses into account before buying. Take hybrid cars for example. For years, people avoided purchasing them because of the high cost to replace the batteries years on down the road. People are now buying them like crazy, but not because the batteries are somehow much cheaper, but because people expect gas to get much more expensive in the future.

  • Tessa /

    If I paint them I can't get my deposit back though!

    I've never owned my own home. I'm 23 and don't have a downpayment/enough money for all the things you mentioned in the post. But no, it isn't the only reason I would like to own my own home. There are many other reasons.

  • YFS /

    I don't think the hybrid car example was a good one. There is still some debate on the value of a hybrid over a non-hybrid car. I own a Prius which gets religiously 45mpg. I only bought my Prius because in VA if you own a hybrid you can ride in the HOV lane with only 1 person in the car. This cuts 45 minutes of commute time. Hybrid vehicles do not make up for the premium price tag until quite some time. For example a new Prius costs. $23,520 and gets you 51 city mpg 48 hwy mpg. A New Honda Civic costs you $15,850 and will get you 28 mpg city and 39 mpg highway. You have to drive a whole lot to make up a $7600 price difference. Heck I don't even think you can make up that price difference within the life of the vehicle.

    But I see your point 🙂

  • YFS /

    Man your landlord sucks. I wouldn't care if my tenants painted. This makes tenants want to stay longer. My only request is that you paint it back when you leave.

    What are some other reasons you want to own a home rather than rent?

  • Tessa /

    Well, I would feel like I was actually investing something each month paying on a house instead of renting from someone else. Not to sound cliche, but it is the "American dream" and I've always wanted to have my own home. I grew up with a…variety of pets (no joke, this included peacocks, a raccoon, etc) and when I have a family someday I'd like them to enjoy an environment similar to the 9 acres I grew up on. Though it's possible, properties like that aren't often available for rent.

    It's the pride of home ownership that I desire as well as the freedom to do what I'd like. 🙂

    It sounds kind of silly when I explain it but it means a lot to me personally that is difficult to describe.

  • YFS /

    Tessa it's definitely not silly. It's apart of finance that many bloggers do not touch on. personal finance is behavioral.. meaning it's more than just numbers. So when you say "pride of ownership" and specify your goal of leaving acres to your family that cannot be quantified.

    What do ya mean it's difficult to describe? You did an amazing job doing it lol.

  • Home ownership can definitely be a money pit. My husband and I LIKE to do improvement projects around the house so there are areas where we can save money.

  • YFS /

    Which areas of your home did you conduct the improvement projects on and why?

  • […] presents 8 Hidden Costs of Home Ownership posted at Your Finances Simplified, saying, “Owning a home has always been a part of the […]

  • Umbrella policy: absolutely! The time a jogger ran out in front of my car at dusk — he was in an unmarked crosswalk — made a believer out of me. I missed him by about 6 inches (max!) at 40 mph.

    My son the unhappy claims adjustor points out that an insurance company pays out only the amount that you're insured for. If you run down a grandmother and her two small grandchildren in an intersection, you're likely to be sued for a lot more than your coverage. Anything above and beyond the coverage you paid for is gonna come out of your pocket (read "retirement savings and future garnished wages").

    Umbrella policies are written on your car insurance, not your homeowner's, but they cover everything, including your dog removing the burglar's foot and the neighbor's kid drowning in your pool. However, mine is not all that cheap…it did jack up my auto insurance premiums.

  • YFS /

    My umbrella policy definitely made m increase my auto limits. But for 125 dollars a year to get an additional 1 million in coverage I'm not complaining.

    One area people should be aware of is that your retirement accounts that are protected under ERISA (401k, 403b, 457 etc etc) are protected from lawsuits.

    Great points!

  • @ YFS: Yeah, that's true about what we call "retirement accounts." However, a substantial amount of what I will rely on to subsidize my retirement resides in brokerage accounts–i.e., that money is not protected. I expect the Roth is sheltered, but savings in plain ordinary Vanguard and Fidelity funds…not so much.

    And I believe they can garnish your Social Security benefits. The umbrella policy, as you point out, isn't that expensive (certainly not as high as your long-term care insurance, for example), and it's very much worth it. Not that I'm planning to run down any ladies pushing strollers…but it does make me feel a lot safer, financially.

  • YFS /

    Unfortunately the ROTH and Traditional IRA is not protected from lawsuits. ERISA doesn't protect those types of accounts. You may be able to transfer those assets into a trust for protection.

  • […] at Your Finances Simplified presents 8 Hidden Costs of Home Ownership, saying “Owning a home has always been a part of the American dream. It’s something […]

  • […] Have You Been Scammed or Ripped Off? How to Get Help and Get The Problem Resolved.YFS presents 8 Hidden Costs of Home Ownership posted at Your Finances Simplified, saying, Owning a home has always been a part of the American […]

  • Don't get me started on HOA fees. I hate HOA's. When we are ready to move the mobile home off park, I plan on getting a peice of land well outside of city limits, because every square inch of this town that's been developed in the last 100 years is owned by HOA's. They even own the streets around here!

  • My boyfriend refuses to even entertain the thought of buying a condo/townhouse because of HOA (in Canada we call it Strata fees) fees.

    The only thing I can think of that would be a cost of renting as well, is the insurance. Renters should have renters insurance – of course, home insurance is likely much more expensive.

  • YFS /

    I pay a HOA fee for my home now, but it's a single family home and not much is baked into the HOA. I am petrified of condo HOA's.. those things seem to go up like tuition costs. The HOA for my single family home hasn't gone up since we purchased our place! Thank you for introducing me to a new term, Strata fees!

  • […] versus a one bedroom condominium will have higher fees. According to the financial services website Your Finance Simplified, if your home is older and more prone to heating, electricity, or plumbing issues then you will […]

  • Frankly the prospect of buying and owning a house is intimidating mostly because I am concerned about hidden costs I have not factored in. I want to assure I have the financial monthly margin enjoy life not feel like a trapped wage slave.

  • URFinanceSimple /

    If you focus on the basic.. emergency fund, maintenance fund and furniture fund before you buy your house you will be okOn Sun, Jul 1, 2012 at 2:43 PM, YFS <yourfinancessimplified@gmail.com> wrote: approve

  • […] things that you can do to lower your annual home owners insurance (I discuss this in my article, 8 hidden cost of home ownership.)You can usually get a discount of at least 5% for a smoke detector, burglar alarm or deadbolt […]

  • That was an impressive post and I very much agree with Andrea Not planning = stupid. I usually find me and my relatives are most probably get into hidden costs like Insurance, Maintenance and Safety.

  • What do you mean you get into hidden costs?

  • […] Finances Simplified : 8 Hidden Costs of Home Ownership – Owning a home has always been a part of the American dream. It’s something that we […]

  • Yes, very true said. There are various hidden costs of house ownership. If someone buy a new house then he has to pay property tax for it first. Then he has to transfer the registry to his name. He also has to do the house insurance. After that he will need furniture for the empty house. The house will also require maintenance on time.

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Teach me how to improve my finances, 

so that I can buy a home

and stop wasting my money on rent