What's It Cost? Homeownership Expenses Beyond Your Mortgage

Owning a home is a dream for many, and affordability is often the make-or-break factor when it comes to purchasing your own house. While the focus of the affordability conversation is often on mortgage payments, homeownership comes with additional expenses beyond what you pay toward your home loan each month. Understanding these costs can help you plan and budget effectively and determine whether homeownership is right for you right now.

Property taxes are a significant, ongoing expense for homeowners—and as the value of your home rises, so too can the amount of tax you owe. This is because the amount varies depending on the assessed value of your property and local tax rates. Property taxes are often rolled into monthly mortgage payments so you can avoid paying one large lump sum. Check with your lender or take a look at your mortgage bill, if you’re not sure if this is the case for you.

Besides being your home, your property is an investment, and protecting it is key. You do that by purchasing home insurance, which covers damages to your property and its contents. If you’re paying for a mortgage, home insurance will be required by your lender. If your home is paid off, carrying home insurance is still a very good idea to protect it against unforeseen circumstances. Shop around for the best rates and coverage to ensure you have adequate protection without overpaying.

Owning a home means you'll be responsible for the utility bills such as water, sewer, electricity, gas, trash removal, and internet. The costs of these services vary based on the size and location of your home, as well as your household’s usage patterns. Taking steps to conserve energy and water can help keep these bills in check.

Homes require regular upkeep to stay in good condition and maintain their value. This includes tasks like landscaping, gutter cleaning, painting, tune up's of major systems, and more. Hiring a professional to do these tasks will often produce better results—but even if you’re an avid DIY’er, you’ll need to factor the cost of tools, supplies, and your time into your budget.

Additionally, the need for unexpected repairs can arise, such as a leaking roof, malfunctioning appliance, or a burst pipe. Building a reserve fund for these unforeseen expenses is a wise financial move that will help prevent extreme stress on you and your budget.

If your property is part of an HOA, you'll likely have monthly or annual fees. These fees vary widely and can add hundreds of dollars to your monthly cost of homeownership—so make sure you’re fully aware of them before you purchase a property. They should be detailed in your contract before you purchase a home, including the monthly or yearly cost, what the fees cover, and how much they can increase each year.

The upside is that the funds you pay to an HOA contribute to the maintenance of common areas and community amenities, which can greatly improve your home’s value and your quality of life.

If your next home is in a newer community, these homes will often have a Mello Roos assessed on each property within that community. The Mello Roos tax was established here in California to fund the costs of buliding a new residential district, including infrastructure development (creating streets, establishing a power and gas network, installing street lights, planting community landscaping, etc), and establishing police services, fire services, schools, parks, etc.

A Mello Roos fee varies from an HOA fee because a Mello Roos is paid on a finite timeline. Once a Mello Roos is paid off, an owner will not be imposed on that fee again. It's important to clarify and consider if a property has Mello Roos, how much that will cost, and for how long.

Mello Roos taxes are commonly paid twice a year via property taxes, but speak to your lender to see how it will be set up for a specific property/community.

While not a regular expense, you may need to replace or upgrade furniture and appliances at times. Having a fund for these occasional but significant costs ensures you're prepared when the time comes.

Many homeowners undertake improvement projects to enhance their living space or increase property value. Whether it's a kitchen remodel or a new deck, budgeting for these projects can help you achieve your goals without straining your finances.

Ensuring the safety of your home and family may involve investing in security systems, cameras, or smart home technology. While these expenses are optional, they contribute to peace of mind and the overall protection of your property.

In conclusion, the cost of homeownership involves more than just mortgage payments. Being aware of these additional expenses and planning accordingly can lead to a more secure and enjoyable homeownership experience. Take the time to assess your budget, plan for the long term, and make informed decisions to safeguard your investment.