If you’re a lifelong renter, seeing all the houses for sale in and around your neighborhood can spur you to want to buy. In some cases, you could be spending more in rent than you would be paying a mortgage. Owning a home does come with a lot of perks as well (in addition to being a good investment, in many cases), which may also have you yearning to buy one of the many houses for sale that you’ve been seeing in your city. But it’s not quite that simple — there are big costs to owning a home, and those costs aren’t typically something you would consider before applying for a mortgage.
In many areas, home prices are surging. Yet, for many millennials, they’re still locked out of the housing market. There are a bunch of barriers keeping many first-time buyers from owning a home, or taking a serious look at the houses for sale that they’re falling in love with, truth be told. But when you really look at the costs of owning a home, it may make a lot of sense to keep renting while finding your financial footing.
The real costs of those houses for sale
To get some of the real numbers, Angie’s List recently put together an informative research project that looks at the actual costs involved with home ownership. The authors found that, unsurprisingly, costs vary wildly depending on where you want to buy, but there are some costs that are a given in nearly every market around the country.
“A home is the biggest investment you’ll ever make — and before you begin house hunting, you need to understand exactly how much house you can afford. After all, unlike renting, homeownership comes with additional costs beyond the down payment and monthly mortgage bill,” the post reads.
“Using data from the U.S. Census’ American Housing Survey, we calculated the hidden costs of homeownership — including utilities, real estate taxes, property insurance, maintenance and repairs — in 54 major metro areas as well as every U.S. region.”
Let’s take a look at four big unexpected costs many first-time homeowners may be surprised by.
You probably pay utilities no matter where you live, but the costs can really hit home when you actually buy a house. Many rentals include some utilities, but as a homeowner, you’ll be on the hook for electricity, water, sewer, garbage, gas, and possibly more — so be prepared. “Along with the mortgage, utility bills represent one of the largest proportions of total housing costs,” the Angie’s List team writes.
“Utility costs vary widely. Overall, the South — especially parts of Texas, Alabama and Tennessee — sees the highest electricity costs, primarily due to higher temperatures that require air conditioning. Trash pickup and water are also especially expensive in certain areas of Texas compared with other states, while Rhode Island has the priciest natural gas.”
If you’re a homeowner, you can’t just call and complain to your management company or landlord when your stove breaks or the plumbing backs up. You’ll need to learn to fix these things yourself, or call a professional. And either option can be very expensive.
“Calculate monthly repair costs by taking 1 percent of your home’s value and dividing it by 12,” Angie’s List’s team writes. “Major repairs, such as replacing the roof or painting the home’s exterior, may occur infrequently — but they can command many months’ worth of repair budgets.”
3. Annual maintenance and upgrades
Keeping up with the Joneses means more than just repairing your home when things break or it’s damaged. To maintain your home’s value, you’ll need to be constantly upgrading and doing routine maintenance projects. If not, your home can lose its value, and problems can quickly compound into much more serious (and expensive) issues.
“Unlike home repairs, home maintenance tasks focus on preventing issues and preparing for the future rather than fixing what’s broken. Median costs of maintenance vary widely by location. Overall, the Northeast carries the heaviest burden, with New York City and Boston home to the highest costs in the country,” the report states.
4. Property taxes
First-time homeowners may be unpleasantly surprised to learn they need to pay taxes on their property. When you rent, those costs are baked into your rent payment — your landlord takes care of it, and you’re probably none the wiser. But when you’re a homeowner, you have some skin in the game. And your property taxes go toward maintaining your community, funding local schools, and more. These vary wildly as well, depending on where you live.
Check out the complete post from Angie’s List here.
Follow Sam on Twitter @SliceOfGinger.