Know Alll the Costs of Homeownership

When Bill Douglass and his wife bought their first home, he budgeted for $250 a month for maintenance costs.

Hey, honey — There’s money leaking out the chimney!

He soon found out that it was $300 a month — just to maintain the lawn.

“I have to admit, I was rather naïve about the costs involved in being a homeowner,” he said.

Two months after they moved in, a FedEx [FDX  93.55  -1.45  (-1.53%)   ] truck accidentally backed into the house, damaging the gutter. That was $900. Then they had a baby girl! It cost an estimated $10,000 for the first year of a baby’s life, according to this baby calculator. Then, the air conditioner went on the fritz. That was $8,000 to replace it. They soon discovered that their neighborhood is prone to power outages, so they needed to consider dropping $10,000 for a backup generator.

“Most people are unprepared for the big repairs — and even the small repairs,” said Guy Cecala, publisher of Inside Mortgage Finance magazine. “When the toilet starts flooding, you can’t call someone like you did when you were renting. You’ve got to fix it yourself.”

To help you get prepared, here are 20 Hidden Costs of Home Ownership.

1. Your heart. You may set a budget for how much you can spend on a new house, but then you find something you love — something you can’t stop thinking about — and even though it’s $50,000 or $100,000 over your budget, you buy it anyway.

“Oftentimes, homeowners make the largest financial decision of their lives — buying a home — with their heart, not their head. They get emotionally involved with the property,” said Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling. “That can put them on a very slippery slope.”

“I suggest people make all financial decisions with their head — and leave their heart out of it!” Cunningham advises.

2. Property taxes. You might think — “I’m paying $1,200 in rent. For that, I could be paying a mortgage and own my own place!” Well, yes. But if you’re only plugging in the principle and interest rate into your mortgage calculator, you’re missing out on a huge expense right out of the gate — property taxes.

You need to find out what the taxes are in advance (they’re usually on the MLS listing), divide it by 12 and immediately add it to your estimated monthly payment.

And remember, the taxes are just going to keep going up — you could even get a tax increase in the first year you own your home — so make sure you have room left in the budget to pay even more taxes.

3. Insurance. It costs a lot more to insure a home than, say, a one-bedroom apartment. So even if you had renters’ insurance, you’re going to have to up the budget for insurance. And, there are a lot of factors to consider when it comes to insurance. Thought you saved more by buying an older house? Well, guess what: It’s going to cost more to insure it because the electrical, heating and plumbing are older and more prone to disaster. Wait, did you fall behind on credit-card payments during the recession but thought you were in the clear because you always paid your mortgage? Well, guess what: Insurance companies can periodically check your credit score and raise your rates based on their assessment of your “risk” level.

Plus, if you live in a flood zone, earthquake zone, tsunami zone or volcano zone, you’re going to have to pay extra for hazard insurance.

4. Appearance. Before the first thing in your house even breaks, there is going to be something that you want to change because this is YOUR HOUSE and when people see YOUR HOUSE, you want them to know that you have taste.

“You don’t want it to look like the worst house on the block,” said Neil Ellington, the executive vice president of CESI Debt Solutions.

So, you add shutters, a paved walkway up to the house, flower boxes, landscaping … it’s amazing how much you spend on the outside of the house that you never had to spend on an apartment.

5. The Lawn. First of all, if you decide to contract the lawn out, it’s going to cost you $100 or so a month for someone to cut the lawn, plus another $100 a month for weed killer, pest control and fertilizer. Plus, any extra you decide to spend on new trees, bushes, flowers or fencing.

If you decide to do it yourself to save money, it’s still going to cost you. You’ve now got to buy a lawnmower, weed whacker, hedge trimmers, a hose, sprinkler, rake, gloves, buckets and more. And, of course, if you don’t have a garage big enough to store all of your new lawn gear, you now also need to buy and install a shed to house them.

Ellington said he and his wife live in a drought-prone area so, to save money on water costs opted to put down stone in a part of the lawn. Well guess what? Stones cost a lot of money, too! Unless you find a builder or homeowner who’s looking to unload some stones from a construction site, stones are going to cost you more than you think. At Home Depot [HD  33.4351  -0.0449  (-0.13%)   ], for example, a small, 11”x14”, resin landscape rock (we’re not even talking flagstone!) is $29.99. A bag of small landscape rocks cost $5 to $50.

6. Add-Ons: decks, patios, sheds and additional rooms. That shed probably set you back a few Benjamins but guess what? It’s also going to bump up your taxes. Any addition or improvement you make, whether it’s a shed, deck, kitchen renovation or expansion of your master bedroom, is not only going to cost you for parts and labor (which can run into the thousands) but it’s going to make your taxes go up. Every year.

7. Maintenance. A co-worker thought he was catching a break on maintenance costs because he had a fireplace but it wasn’t a working fireplace. Well, then someone told him the chimney — you know, the non-working chimney on the outside of the house — needed to be repointed because the bricks were loose and could fall off and hurt someone. So, he has to pay more than $1,000 to have a mason come in and stabilize that purely aesthetic chimney. How charming!

There are a million unexpected maintenance costs like this. You’ve got to reseal the driveway, restain the deck, clean the gutters, repair and eventually replace the roof, repair any cracks in the siding, patch the front steps — and that’s just the outside! On the inside, you’ve got to repair the appliances, fix any plumbing leaks, replace filters, seal your doors and windows, drain the water heater and clean the chimney. Plus, patch the walls, replace the toilets, repaint, restain the floors or replace the carpet and regrout the bathroom.

This is why you always hear homeowners say — It’s always something! (It’s also, incidentally, the reason that mommy and daddy sometimes seem grumpy for no reason!)

8. Cleaning. Cleaning a house is a lot of work. Whereas you might’ve had one vacuum and set of cleaning supplies in an apartment, now you may want to have multiple vacuums and sets of cleaning supplies so you don’t have to lug them up and down one or two flights of steps.

Beyond the cost of multiple sets of supplies, cleaning takes time and energy — something you might not have, especially if all the adults in the home work. If you opt to hire a cleaning person, that’s going to cost you $100 or more for every visit, which can add up to over $1,000 during the year.

9. Time! Time is “the No. 1 thing — your biggest cost — of being a homeowner,” Ellington said.

You don’t realize what all your rent went toward and when you have to do it yourself, it costs you a lot — a LOT — of time.

“The time you used to spend with your kids, now you spend on lawn maintenance or changing a lightbulb!” Ellington quipped.

10. The furnace and air-conditioning. So, you buy a house and the inspector tells you that the furnace is only four years old and that you may have another 16 or more years left on it. You figure you’re in the clear, you’ll be long gone by then, right? Wrong. A lot of people will tell you you’ll get 20 years out of a furnace but it’s really closer to 10, Cecala says. Then, consider the fact that if the furnace is four or more years old, it probably isn’t energy efficient. So, instead of repairing your furnace or air conditioning units for the next few years, it’s probably better to shell out the cash for a new furnace or central air.

Make sure you know what type of furnace you have before you buy the home. We found out all too late that our new home, with the gorgeous addition and luxurious central air actually had two furnaces because when the previous homeowner did that renovation, he didn’t extend the old heating system into the addition, he just put the vents for the new A/C system in there, which means you have to run both furnaces to heat both the old and the new sections of the house.