Hidden costs of homeownership average $18,000 a year

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86% of consumers believe it is a bad time to buy a home: Fannie Mae

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It's no secret that buying a home in the United States has become more expensive. But the cost of maintaining and maintaining a home has also increased significantly, which may come as a surprise to some buyers.

The “hidden costs” of homeownership average $18,118 a year, or $1,510 a month, according to a new report from Bankrate.com. The national figure includes the average cost of property taxes, home insurance, and electric, internet and cable bills. It also includes maintenance costs, estimated at 2% of the home's value per year.

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The price of such hidden costs in a typical single-family home in the U.S. is about 26% higher than it was four years ago, according to the report. In 2020, the same expense amounted to $14,428 per year, or $1,202 per month.

“It's important to understand that you're buying a lot more than just a mortgage payment,” says Jeff Ostrowski, an analyst at Bankrate.com. “You're also buying all these additional costs that you'll have to worry about later.”

According to the Mortgage Bankers Association, the average mortgage payment nationwide in April was $2,256, up $144, or 6.8%, from a year earlier.

Older homes may require more repairs

Of all the expenses used to calculate the national average, experts say it's maintenance and repair costs that often surprise new homeowners, as repair costs can vary widely depending on the age of the home.

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

“Home buyers have to make compromises, and often it’s because of the age or condition of the home,” she said.

Although supply is increasing on the market, many of these homes were built decades ago, according to the U.S. Census Bureau's 2022 American Community Survey. The survey found that the average age of homes in the U.S. is about 40 years old.

A home this age “may need system upgrades, so consider a new air conditioning system. [heating, ventilation, and air conditioning] unit, windows or doors,” Lautz said.

According to Angi.com, an online marketplace that connects homeowners with professional contractors for home maintenance or renovation, the average roof lasts about 30 years, while vinyl siding can last three to four decades.

“These are costs that can add up really quickly,” Ostrowski said.

For beginners, repairs are “part of the learning process”

First-time home buyers in particular are unaware of the true costs of maintenance and repairs, as these expenses are “part of the learning process on the way to becoming a homeowner,” Ostrowski said.

“If you’ve been a homeowner for a while, you know what can go wrong,” he said.

One mistake, however, is to spend all your savings on the down payment and end up “house poor,” says Ostrowski.

“Then you move in and you don't really have any money left for repairs and maintenance, so you end up going into credit card debt or taking out a higher interest rate loan to pay it all off,” he said.

According to Angi.com, in 2023, 46% of homeowners used cash from savings to finance home improvement projects. About 20% used credit cards, while 7% refinanced an existing loan and 5% used a home equity line of credit, the website said.

Don’t skip a home inspection

In recent years, many home buyers have skipped a home inspection because of the competition among other buyers, Ostrowski said. In many cases, people who were already homeowners and could make cash offers were more likely to forego a home inspection.

“They are not in the same vulnerable position as a first-time buyer” or someone who has never gone through the process before, he said.

In some areas, competition is still fierce.

On average, there are three offers for every house for sale, Lautz said.

In April, about 19% of buyers skipped a home inspection, according to NAR data, compared to 22% the previous month and 21% the year before.

But skipping the inspection is risky and should not be done lightly. An inspection is an important safety measure that can help you understand some of the maintenance tasks and repairs that may be needed when you make your purchase.

Otherwise, it could be a factor that could drive up ongoing costs after purchasing a home, Ostrowski said.

“This definitely increases the risk that someone will move into a house and not realise that the [air conditioning] was about to go out of business, or the water heater had given up the ghost, or the roof needed to be replaced,” he said.