Homebuyers take on ‘a lot more than a mortgage payment,’ expert says — ‘hidden costs’ average $18,000 a year

It’s no secret that buying a home has gotten more expensive in the U.S. But the cost of keeping and maintaining a home has gotten significantly pricier, too, which might come as a surprise to some buyers. 

The “hidden costs” of homeownership add up to an average $18,118 annually, or $1,510 a month, according to a new report by Bankrate.com. The national figure includes the average costs of property taxes, homeowners insurance, and electricity, internet and cable bills. It also includes home maintenance, which was estimated at 2% a year of the value of a home.

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The price tag of such hidden costs within a typical, single-family home in the U.S. is roughly 26% higher compared with four years ago, the report found. In 2020, the same expenses amounted to $14,428 annually, or $1,202 a month.

“It’s just important to understand that you’re buying a lot more than a mortgage payment,” said Jeff Ostrowski, an analyst at Bankrate.com. “You’re also buying all these additional costs that you’re gonna have to figure out how to pay for.”

The national median mortgage payment in April was $2,256, up $144 or 6.8% from a year ago, according to the Mortgage Bankers Association.

Out of all the expenses used to calculate the national average, maintenance and repair costs often surprise new homeowners more because of how much repair costs can vary, depending on the age of the home, experts say.

“Because of the lack of building, we know that homes that are being purchased are older,” said Jessica Lautz, deputy chief economist at the National Association of Realtors.

“Homebuyers have to make a compromise along the way, and often it’s the age or the condition of the home,” she said.

While available supply on the market is increasing, many of those homes were built decades ago, according to the 2022 American Community Survey by the U.S. Census Bureau. The survey found that the median age of owner-occupied homes in the U.S. is about 40 years old.

A home around that age “may need system upgrades, so think about a new HVAC [heating, ventilation, and air conditioning] unit, or windows, or doors,” Lautz said.

A roof lasts about 30 years on average while vinyl siding may last three to four decades, according to Angi.com, an online marketplace that connects homeowners with professional contractors for home maintenance or renovations.

“Those are the kind of costs that can really add up quickly,” Ostrowski said.

First-time homebuyers especially don’t realize the true cost of maintenance and repairs because such expenses are “part of the learning process of becoming a homeowner,” Ostrowski said.

“Once you’ve been a homeowner for a while, you realize everything that can go wrong,” he said. 

A mistake, however, is spending your entire reserve of savings for the down payment and ending up “house poor,” Ostrowski said.

“Then you move in, and you don’t really have any money left for repairs and maintenance, so you wind up running up credit card debt or taking out some kind of higher interest debt to pay for that,” he said.

In 2023, 46% of homeowners used cash from savings to cover home improvement projects, according to Angi.com. About 20% used credit cards, while 7% refinanced an existing loan and 5% used a home equity line of credit loan, the site found.

In the past few years, many homebuyers on the market waived home inspections, as competition among other buyers was high, said Ostrowski. In many cases, people who were already homeowners and could make cash offers were more likely to waive a home inspection.

“They’re not in the same sort of vulnerable position as a first-time buyer,” or somebody who’s never gone through the process, he said. 

Competition is still hot in some areas.

On average, there are three offers for every home that’s listed for sale, Lautz said.

In April, around 19% of buyers waived the home inspection, down from 22% one month prior and 21% a year earlier, according to NAR data.

But waiving the inspection is risky and not something to do lightly. An inspection is an important safeguard that can help you go into the purchase understanding some of the maintenance tasks and repairs that may be on the horizon.

Otherwise, it can be a factor that can inflate the ongoing costs after you close on a house, Ostrowski said.

“That definitely raises the risk of somebody moving into a house and not realizing that the [air conditioning] was about to go, or the water heater was on its last legs, or the roof needs to be replaced,” he said.