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20 Hidden Costs of Home Ownership

When Bill Douglass and his wife bought their first home, he budgeted for $250 a month for maintenance costs.

He soon found out that it was $300 a month — just to maintain the lawn.

“I have to admit, I was rather naïve about the costs involved in being a homeowner,” he said.

Two months after they moved in, a FedEx truck accidentally backed into the house, damaging the gutter. That was $900. Then they had a baby girl! It cost an estimated $10,000 for the first year of a baby’s life, according to this baby calculator. Then, the air conditioner went on the fritz. That was $8,000 to replace it. They soon discovered that their neighborhood is prone to power outages, so they needed to consider dropping $10,000 for a backup generator.

“Most people are unprepared for the big repairs — and even the small repairs,” said Guy Cecala, publisher of Inside Mortgage Finance magazine. “When the toilet starts flooding, you can’t call someone like you did when you were renting. You’ve got to fix it yourself.”

To help you get prepared, here are 20 Hidden Costs of Home Ownership.

1. Your heart. You may set a budget for how much you can spend on a new house, but then you find something you love — something you can’t stop thinking about — and even though it’s $50,000 or $100,000 over your budget, you buy it anyway.

“Oftentimes, homeowners make the largest financial decision of their lives — buying a home — with their heart, not their head. They get emotionally involved with the property,” said Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling. “That can put them on a very slippery slope.”

“I suggest people make all financial decisions with their head — and leave their heart out of it!” Cunningham advises.

2. Property taxes. You might think — “I’m paying $1,200 in rent. For that, I could be paying a mortgage and own my own place!” Well, yes. But if you’re only plugging in the principle and interest rate into your mortgage calculator, you’re missing out on a huge expense right out of the gate — property taxes.

You need to find out what the taxes are in advance (they’re usually on the MLS listing), divide it by 12 and immediately add it to your estimated monthly payment.

And remember, the taxes are just going to keep going up — you could even get a tax increase in the first year you own your home — so make sure you have room left in the budget to pay even more taxes.

3. Insurance. It costs a lot more to insure a home than, say, a one-bedroom apartment. So even if you had renters’ insurance, you’re going to have to up the budget for insurance. And, there are a lot of factors to consider when it comes to insurance. Thought you saved more by buying an older house? Well, guess what: It’s going to cost more to insure it because the electrical, heating and plumbing are older and more prone to disaster. Wait, did you fall behind on credit-card payments during the recession but thought you were in the clear because you always paid your mortgage? Well, guess what: Insurance companies can periodically check your credit score and raise your rates based on their assessment of your “risk” level.

Plus, if you live in a flood zone, earthquake zone, tsunami zone or volcano zone, you’re going to have to pay extra for hazard insurance.

4. Appearance. Before the first thing in your house even breaks, there is going to be something that you want to change because this is YOUR HOUSE and when people see YOUR HOUSE, you want them to know that you have taste.

“You don’t want it to look like the worst house on the block,” said Neil Ellington, the executive vice president of CESI Debt Solutions.

So, you add shutters, a paved walkway up to the house, flower boxes, landscaping … it’s amazing how much you spend on the outside of the house that you never had to spend on an apartment.

5. The Lawn. First of all, if you decide to contract the lawn out, it’s going to cost you $100 or so a month for someone to cut the lawn, plus another $100 a month for weed killer, pest control and fertilizer. Plus, any extra you decide to spend on new trees, bushes, flowers or fencing.

If you decide to do it yourself to save money, it’s still going to cost you. You’ve now got to buy a lawnmower, weed whacker, hedge trimmers, a hose, sprinkler, rake, gloves, buckets and more. And, of course, if you don’t have a garage big enough to store all of your new lawn gear, you now also need to buy and install a shed to house them.

Ellington said he and his wife live in a drought-prone area so, to save money on water costs opted to put down stone in a part of the lawn. Well guess what? Stones cost a lot of money, too! Unless you find a builder or homeowner who’s looking to unload some stones from a construction site, stones are going to cost you more than you think. At Home Depot , for example, a small, 11”x14”, resin landscape rock (we’re not even talking flagstone!) is $29.99. A bag of small landscape rocks cost $5 to $50.

6. Add-Ons: decks, patios, sheds and additional rooms. That shed probably set you back a few Benjamins but guess what? It’s also going to bump up your taxes. Any addition or improvement you make, whether it’s a shed, deck, kitchen renovation or expansion of your master bedroom, is not only going to cost you for parts and labor (which can run into the thousands) but it’s going to make your taxes go up. Every year.

7. Maintenance. A co-worker thought he was catching a break on maintenance costs because he had a fireplace but it wasn’t a working fireplace. Well, then someone told him the chimney — you know, the non-working chimney on the outside of the house — needed to be repointed because the bricks were loose and could fall off and hurt someone. So, he has to pay more than $1,000 to have a mason come in and stabilize that purely aesthetic chimney. How charming!

There are a million unexpected maintenance costs like this. You’ve got to reseal the driveway, restain the deck, clean the gutters, repair and eventually replace the roof, repair any cracks in the siding, patch the front steps — and that’s just the outside! On the inside, you’ve got to repair the appliances, fix any plumbing leaks, replace filters, seal your doors and windows, drain the water heater and clean the chimney. Plus, patch the walls, replace the toilets, repaint, restain the floors or replace the carpet and regrout the bathroom.

This is why you always hear homeowners say — It’s always something! (It's also, incidentally, the reason that mommy and daddy sometimes seem grumpy for no reason!)

8. Cleaning. Cleaning a house is a lot of work. Whereas you might’ve had one vacuum and set of cleaning supplies in an apartment, now you may want to have multiple vacuums and sets of cleaning supplies so you don’t have to lug them up and down one or two flights of steps.

Beyond the cost of multiple sets of supplies, cleaning takes time and energy — something you might not have, especially if all the adults in the home work. If you opt to hire a cleaning person, that’s going to cost you $100 or more for every visit, which can add up to over $1,000 during the year.

9. Time! Time is “the No. 1 thing — your biggest cost — of being a homeowner,” Ellington said.

You don’t realize what all your rent went toward and when you have to do it yourself, it costs you a lot — a LOT — of time.

“The time you used to spend with your kids, now you spend on lawn maintenance or changing a lightbulb!” Ellington quipped.

10. The furnace and air-conditioning. So, you buy a house and the inspector tells you that the furnace is only four years old and that you may have another 16 or more years left on it. You figure you’re in the clear, you’ll be long gone by then, right? Wrong. A lot of people will tell you you’ll get 20 years out of a furnace but it’s really closer to 10, Cecala says. Then, consider the fact that if the furnace is four or more years old, it probably isn’t energy efficient. So, instead of repairing your furnace or air conditioning units for the next few years, it’s probably better to shell out the cash for a new furnace or central air.

Make sure you know what type of furnace you have before you buy the home. We found out all too late that our new home, with the gorgeous addition and luxurious central air actually had two furnaces because when the previous homeowner did that renovation, he didn’t extend the old heating system into the addition, he just put the vents for the new A/C system in there, which means you have to run both furnaces to heat both the old and the new sections of the house.

WIRING--CABLE, PHONE & INTERNET

11. Wiring – cable, phone, Internet. When Amy Martin and her husband bought their first house a few years ago, they discovered that their cable service was spotty — some channels worked but others didn’t. When they went to get it repaired, they were told that they were “leaking” cable because the wiring in their house was either not the right size or connected wrong. The wires on the outside are the utility company’s responsibility but any of the wiring on the inside of the house is YOUR responsibility. So, they had to bring an electrician in for 3 to 4 hours to rewire the home.

“In most cases, when you are house hunting, you tour the house a few times, and may or may not be present for the inspection. By the time you've purchased it, you've spent a grand total of about 2-3 hours in the house!” Martin exclaimed, which, for those keeping score, is less time than the electrician spent in the house rewiring the cable!

12. DIY. With the rise of home-improvement channels, everyone, it seems, has DIY — do-it-yourself — fever. Lay down your own flooring? No problem! Strip the bathroom, knock down a wall and put in a new master suite? No problem!

Actually, problem. Most of us, no matter how many hours of HGTV we’ve logged, don’t know a lot about plumbing, electricity, support beams or the finer nuances of cutting granite.

So, in reality, when you think you’re saving on labor costs by doing it yourself, you may be costing yourself more if you ruin the materials you bought, had to buy a second set and then had to pay a guy to come do it for you anyway!

13. Extra stuff the guy finds when he comes for something else. So, you bring in a guy to help you with the kitchen remodel and while he’s outside on his smoke break, he reaches under the front porch and pulls out what looks like a handful of straw. In fact, that’s rotting wood from your front porch — you know, the one your precious little girl bounces on when she’s playing with her friends.

To your untrained eye, the porch, the chimney — it all looks good. But bring in a professional and they’ll inevitably find two or more things that need fixed.

14. Safety. From fixing the front porch to installing an alarm system, adding motion-detector lights or lighting a footpath, those extra safety features are going to cost you extra money.

15. Pest control. If you saw a bug or a mouse in your apartment, you just called the landlord. When you own your own house, there’s no one there to hear your screams. Dealing with termites, cockroaches, mice, bats or the latest pest craze, bed bugs, costs a lot of money. Spend a couple hundred dollars for routine maintenance and it will save you lot more later if you have to get the place bombed and throw out some of your furniture or replace the floor because the varmints got to it.

16. Savings. Do you know how much money you can save by installing new windows, a programmable thermostat and energy-saving lightbulbs? A whole lot! But guess what? In order to save a lot, you’ve got to spend a lot up front. While you’re focused on the savings, your money is slipping out the back door.

“These are expenses that people don’t think about when they buy a home but have to think about after the initial honeymoon phase with the house — it’s just like a marriage!” Ellington said.

17. Emergency. Like Douglass, you generally don’t realize until after the FedEx truck has backed up into your house and you’ve had a bouncing, baby girl that your neighborhood is prone to power outages. And remember, power outages usually happen at the worst times — when it’s ridiculously hot out or freezing cold, which means you'll probably be desperate enough to spend a lot of money to be comfortable!

They sell smaller generators but you’ll soon learn that they don’t power much and you have to refuel them often. Realistically, you’re looking at a couple thousand dollars to power up the basics. Or, be prepared to shell out a couple hundred bucks a night for a hotel. If you have kids, make sure it has an indoor pool — one family in one room with one TV is challenging for one night, and you have no idea how many days it will be before the power comes back on!

18. Kids. Not only are you kids going to cost you money for diapers, baby food, clothes they're going to grow out of, jeans, soccer lessons, dance classes, phones and college, but they’re going to cost you a couple thousand in damages over the years. They're going to draw on the walls, run into the screen door, put a baseball through a window, spill cranberry juice all over the living-room rug — and more. When it’s a rental, the most you had to worry about was your security deposit. Owning your own home, you’ll reminisce the days when that was all it would’ve cost you.

Some people set aside jars of money for vacations or other fun items, you might do well to set aside a jar for kid disasters!

19. Nearby construction. Make sure you know who owns the land around you and what the zoning laws are. If you buy a home with an amazing view and then someone comes and builds a 20-story condo building in front of it, that’s going to cost you big time when it comes time to sell your house. Likewise, if nearby land is designated for commercial use, you never know when a gas station will go up or a giant shopping center that will make your road busy and slash your property value.

20. Buyer demands. Congratulations! You’ve made it through 1-19 on the list. But don’t take a rest just yet — 20 is a big one. It’s important to keep up with routine maintenance — buying a new furnace, replacing the roof and fixing that wobbly board in the porch. Because when you go to sell your house, those are the things that a buyer is going to notice — and they could cost you the deal. After getting the home inspection, it’s not uncommon for a buyer to demand that you replace the furnace or get a new roof as a condition of the sale. You’re already going to have a lot of costs (paying the real-estate agent, closing costs, moving costs, etc.) so you don't want to have to tack on another $10,000 or so for repairs — or worse, have them knock money off the sale price because of it.

Before you buy a house, it’s important to figure out if you can afford all the costs of a new home.

As a good rule of thumb, don’t spend a lot on discretionary items — like clothes, gadgets and vacations — in those first few years. Set aside much as you can for the unexpected expenses and wait a year or two to see how it shakes out.

The National Federation for Credit Counseling has a list of questions on their Web site you should ask yourself to see if you’re ready to own your own home. Plus, they have more than 800 locations nationwide that offer free first-time-homebuyer courses to educate people on all the ins and outs of buying a home and the responsibilities that go with it.

Ellington also suggests hanging out with a friend who’s a homeowner on the weekends. Volunteer to do his yardwork. Find out how much time and money is involved before you commit to having your own house.

“It’s like marriage,” Ellington said. “If you prepare for it, you’re much better off!”

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.