Don’t Overlook the Ongoing Expense of Owning a Home

Many prospective homeowners focus on whether they can afford monthly mortgage payments, which have been driven higher recently by rising interest rates and skyrocketing home values. But when considering whether a home is within your budget, it’s also important to include ongoing costs, such as property taxes, insurance and maintenance, because those expenses have also risen significantly in the past four years.
A Bankrate.com survey found that the average cost of owning and maintaining a home in the United States is $18,118 a year (or about $1,510 a month), up 26 percent from 2020. In addition to taxes, insurance, and maintenance and repairs, these ongoing costs include utilities and cable and internet service, too.
As is the case with the median sale price of homes, the ongoing cost of owning a home varies significantly depending on where you live. You may pay more in states with high home values, above-average property taxes or above-average premiums for homeowners insurance.
Homeowners are often constrained by their jobs or other factors when they choose where to live, and you may decide that higher costs are a worthwhile trade-off if your neighborhood has good schools, a low crime rate and other desirable features. But there are steps you can take to manage ongoing expenses:
Maintain enough in savings to cover both expected and unexpected costs. Real estate website Zillow recommends keeping from 1 percent to 4 percent of the cost of your home in reserve for these expenses.
Complete a home inspection. In a competitive market, you may be tempted to waive an inspection to get an edge over other buyers, but that’s usually not a good idea. Without an inspection, you can’t get a good handle on your ongoing costs and how much you’ll need to invest in the home. For example, an inspector should estimate the age of a home’s appliances, which will help you determine when you’ll have to replace them.
Shop around for homeowners insurance, and take advantage of all potential discounts, including breaks for paying your premium annually instead of monthly, switching to paperless statements, being a nonsmoker, being a loyal customer, avoiding claims for several years, and bundling your homeowners insurance with other policies, such as auto, boat and life. Taking steps to protect your home can prevent costly claims and qualify you for other discounts. For example, some insurers give homeowners credit for setting up a fire-alarm and home-security system.
Take advantage of breaks on property taxes. Many states offer homestead exemptions for homeowners who are 65 or older, individuals with disabilities, veterans, and others. Contact your state’s department of taxation or visit its website to see what breaks are available to you.