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The True Cost of Home Ownership: Do You Have Your Numbers Right?

The True Cost of Home Ownership: Do You Have Your Numbers Right?

Settling into the dreamy decision of home ownership can feel surreal. Dream home. Dream yard. A white picket fence. It sounds perfect, right?

But the flip side to homeownership is the cost – and you definitely do not want the numbers in your head to be as surreal as the experience of homeownership may feel. You want the facts, and you need to know the hard and fast numbers so you can budget accordingly. Truth be told, most homeowners, before they were homeowners, were not aware of some of the most essential basic costs to consider when owning a home.

Let’s break it down.

The Top 7 Financial Questions to Consider Before Becoming a Homeowner

Before you grab up the keys to a new home, make sure you have your numbers right. Being prepared is step one in homeownership, which is why we always encourage people to compare quotes and get the numbers straight before jumping in.

7 Financial Questions to Consider Before Becoming a Homeowner:

1. What about up-keep costs?

The U.S. Census Board believes that, on average, every home requires annual maintenance of around 1 to 4 percent of the home’s value. The older your home is, the more expensive this number can become. Using that formula, a $200,000 home might require between $2,000 and $8,000 per year in general upkeep costs. Plus, average appliance repair costs can realistically range anywhere from $100–350 per year, if not thousands, depending on the age and use of the appliances. Home warranty plans were created to keep your family covered, so that when the first domino falls, whether it’s the dishwasher or the washing machine, you have protection in place so the walls around you don’t fall down with it.

► Compare home warranty quotes by starting first with where you live. Conduct an address search by starting here.

2. What about property taxes?

Taxes have a considerable effect on the true cost of home ownership. In 2016, American homeowners paid nearly $278 billion in property taxes, and according to the U.S. Census Bureau, each year the average American household spends $2,149 in property taxes. Is this a number you’re prepared for?

If you haven’t yet had to pay property taxes on your new home, budgeting for this hefty tax is not only smart but critical in preserving a home budget.

To determine your taxes, multiply your local rate by the value of your home. So, if your home is worth $200,000 and your local tax rate is 1.5%, your property tax will be around $3,000.

► Budget Tip: Divide your estimated annual property tax amount by 12 and incorporate the total as a line item into your monthly budget. And, keep in mind, taxes will continue to rise. It never hurts to leave room in your budget for wiggle room further down the road.

3. What about the HVAC system?

New highs and record lows in weather will likely keep your HVAC unit working hard all year long.
Homes that use electricity, propane, or oil will spend $900, $1,666, and $2,400 per year respectively for heating a home. If the HVAC unit goes kaput, these repairs, on average, cost around $400, with furnace replacement clocking in at close to $800 to fix. Air conditioning costs roughly $300 annually. An open window on a breezy day? Priceless.

4. What about homeowner’s insurance?

If you’re transitioning out of renting a two-bedroom apartment to becoming the newest homeowner on the block, your insurance is going guessed it, rise. Older homes can be more expensive to insure, thanks to the dated electrical work and antiquated heating and plumbing systems they typically come with. Depending on where you live, you may also need to shell out dough for hazard insurance, especially if you live in a flood zone, an earthquake zone, within the reach of a tsunami, or close to a volcano.

5. What about keeping up with appearances?

Shutters. A paved walkway. A new front door. Painting the siding. It’s amazing how much these simple weekend DIY projects can throw a budget out of whack.

Consider this: A single, small bag of landscape rocks can cost anywhere between $5–50.

Our advice? Put a line item in the budget and keep your Pinterest ideas to a minimum. Also, when possible use your own labor instead of hiring someone else to do it for you.

6. What about the lawn?

Someone will need to cut the lawn, fertilize the lawn, and help with pest control. Will that be you or someone who you pay to hire? You may want to plant new trees, add in bushes, or start a rose garden. If you choose to do the landscaping jobs yourself, you’ll need to fork over money for a lawnmower, a weed whacker, hedge trimmers, a hose, a sprinkler, rakes, gloves, buckets, watering cans, and more.

7. What about inflation?

What about inflation? Inflation causes everything to go up, so while the bright side is the value of your home may very well increase, so too will your property taxes and all of the costs of homeownership we just outlined. Looking towards the future and anticipating increased costs across the board for homeownership seems about right.

Closing Thoughts

While homeownership is not for the faint of heart, it is absolutely possible and paramount to budget for it. At, we want to help you understand what to expect when it comes to owning a home. Budgeting and having certain protections in place, like a home warranty, can make owning a home a whole lot easier and more affordable, and avoid "Homeownership Nightmares".

► Compare home warranty quotes and companies where you live. Start here.

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