What are the All-in Costs of Home Ownership?
Conventional wisdom may lead you to believe that the only costs of home ownership are the down payment and the monthly mortgage payment. However, if you budget with only these two factors in mind, you'll likely be caught off guard when the bills come rolling in.
Here are some additional costs to keep in mind:
Closing Costs
A typical home buyer pays 2-5% of the cost of the home to obtain the loan and complete the real estate transaction. This amount goes towards things like an appraisal of the home value, attorney fees, title search fees, transfer taxes, and other required fees your lender might charge.
Interest Payments Monthly mortgage payments consist of two components — the principal payment and the interest payment. The principal payment goes towards paying down the debt, while the interest payment is what the bank charges to make the loan.
Property Taxes Most local governments levy a tax on your real estate. The amount ranges between 0-4% and is applied to the value of the home.
Source: American Community Survey
Insurance Costs A homeowner will on average pay $100/month for insurance against property loss or damage. In regions that are more prone to natural disasters the average rate can be substantially higher.
Source: American Community Survey
Maintenance Costs
A homeowner spends on average $700 per year, or 0.31% of the average home value, on routine maintenance.
Source: American Community Survey
HOA Fees Homeowner association fees range by location. For example, the average monthly HOA in Portland, OR is $30, while in Boston, it’s $200.
Source: American Community Survey
While owning a home comes at a hefty price, it is well worth it in the long run. This is not intended to deter you, but to inform you so you have a better understanding of what fees and costs can be attached to owning a home.