This post is from Jennifer Riner at Zillow.
Making the switch from renting to owning? While historically low mortgage rates might mean your monthly mortgage costs are lower than what you paid while leasing, buyers must plan for more than a mortgage. Although you might factor in the high cost of a down payment, and the title and insurance fees you now face as a homeowner, it’s also important to consider the extra or hidden costs of homeownership.
These extra costs can range from property taxes to minor landscaping fees to major roof repairs – depending on your region and the size of your property. According to a recent report from Zillow, the leading real estate marketplace and Thumbtack, a website that connects consumers with service professionals, homeowners might face $9,000 or more per year in hidden or extra homeownership costs. These include both unavoidable costs, such as utilities, and optional maintenance expenses like gutter cleaning.
Unavoidable Hidden Costs
The report identified three unavoidable hidden costs, which include homeowners insurance, property taxes and utilities. These are non-optional costs, meaning almost every homeowner is responsible for these dues – regardless of where they live.
On average, homeowners in the United States pay $6,042 per year to cover these unavoidable costs. However, these specific costs can vary widely by region. The highest metro analyzed was Boston, where homeowners could expect to pay $9,413 each year. Increased hidden costs in Boston are largely due to high property taxes. On the other hand, house hunters searching for homes in Phoenix, for example, might only expect to pay around $4,513 in annual hidden unavoidable costs – the least expensive of the metros identified.
Optional Maintenance Costs
While considered “optional,” maintenance costs are also an important cost to consider when budgeting for homeownership, even if you plan to do many of these projects yourself. Regular cleanings and aesthetic maintenance aren’t absolute necessities, and some homeowners prefer to take care of property maintenance themselves rather than hire out, subsidizing much of the overhead associated with visual maintenance. However, regardless of whether they plan to hire out or DIY, it’s important for homeowners to at least be aware of some of the common expenses associated to maintaining a home so they can plan ahead accordingly.
U.S. homeowners pay an average of $3,435 for costs like house cleaning, yard care, gutter maintenance, carpet cleaning and pressure washing. San Francisco homeowners have the highest home maintenance costs, at around $4,653 per year. Homebuyers looking in Denver, on the other hand, could pay much less at $2,782 annually, on average. Denver is the least expensive metro for optional maintenance costs analyzed in this study.
How to Plan for Homeownership Costs
You can eliminate extra costs associated with homeownership costs by learning about landscaping and doing it yourself, as well as learning how to clean your own gutters. Don’t forget to consider the difference in utility costs when moving to a different climate. For example, homeowners in Seattle might not need air conditioning, whereas homeowners in the Midwest require it May through October to fight the hot, humid summer. This can add on as much as $100 to your regular electric bill.
When purchasing a home, consider asking your lender for a credit back from the seller at closing rather than a reduced purchase price. Lenders sometimes allow a 6 percent credit for buyers to set aside in case of emergency maintenance or needed home improvements. While it doesn’t diminish your costs right away, you can rest easy knowing you have money set aside to offset the covert, costly homeownership fees.
What was the most surprising cost you’ve faced after buying a home?