Written By: Kirby Williams

The Costs of Homeownership and How to Prepare

My husband and I closed on a brand new home in May 2012. Situated in a Boston suburb, we were lucky to be shopping for a home in a time when the real estate market was not incredibly competitive (compared to the past few years, especially) and when mortgage rates were low. We locked in a 3.75 fixed rate and jumped on a home where everything was fresh and new. As people who had no experience with home maintenance, tools or DIY projects, we were eager for what felt like a clean slate with no construction projects on the horizon. While it was true that nothing needed to be done immediately, we were painfully ignorant of what was needed to maintain the sparkling new systems and keep them working well long term. We would end up paying for not thinking about this.  

At closing, we handed over almost $90,000, which was every bit of our savings. For a few years, homeownership felt as easy as we had predicted. Small things needed repair and we googled or asked around for recommendations and got them fixed. One element, however, we ignored. The house has 2 decks and a set of steps leading to the front entrance: all were made of unfinished wood. We knew that wood needs to be stained or painted so that it doesn’t rot, especially if you have snow sitting on it for a portion of the year. We knew this, and we put it off, for the sole reason that it didn’t seem urgent.  

Over time the wood became darker and was obviously in need of refinishing. We hand scrubbed the front steps and part of the back deck, and after several years when I had grown more confident with tools and home projects, I borrowed a pressure washer to clean the front steps and back deck of algae that had grown. This helped a lot, until the wood on one of the front steps finally gave way under the power of the pressure washer, having been weakened by the softening and rotting of the wood over the past 10 years. Finally after 12 years in the house, we were forced to address what would have been a relatively easy project had we done it in the beginning. Nearly twenty thousand dollars later, we have replaced the front steps and side deck with a composite material that won’t rot. Our back deck remains unfinished, unused as it is dangerous to step on, and a reminder that not maintaining your home can be much more costly than doing the project upfront.  

Don’t Overspend on the Mortgage  

The amount that you pre-qualify for a mortgage is not necessarily the amount of money you can afford to spend each month. Tracking your spending for several months could help you to see what you typically spend on groceries, childcare, cell phone and other bills that won’t change once you purchase a home. Then add in new expenses (see below for some examples) and form a do-able mortgage budget. Setting yourself up for success on a big monthly payment can prevent a lot of stress.  

Think about monthly non-mortgage expenses 

Once you narrow down the location or possible locations of your home purchase, do some research on local taxes and municipal utility bills, if applicable. For example, is the town planning a new school or fire station in the future? This could increase your taxes down the road — though it could also raise the value of your home. What is the average water bill, if you plan to live in a town/city where water is billed? Finally, consider costs like electricity and gas. If you currently live in an apartment where utilities are part of the monthly rent, you could get a shock when those first bills roll in. And if the size of your new home is different from where you live now,  you could find that even if you are used to paying for light and gas, the size of your bills may change depending on if you are expanding your space or sizing down.  

Maintain what you have  

Having learned this lesson the hard way to the tune of $20,000, home maintenance shouldn’t be put off. Getting annual check-ups/tune ups on HVAC and other big systems can help these systems last longer and perform better — our central air conditioning unit’s condenser died this past year. Though we had had it serviced, the company representative who came to look at the unit said it appeared the filters had not been changed often enough and the coil not cleaned properly. These things made the unit work a lot harder than it was meant to and shortened the life span of the unit. Replacement will cost around $15,000. Unfortunately, what we learned is that you need to learn how your home works — don’t assume that an annual check up is doing everything needed, though it’s certainly a good start. Read the appliance manual — many times there are relatively simple things that you can do to help keep appliances, systems like your A/C or boiler or even your dishwasher running longer and more efficiently.  

Bottom line on home maintenance costs 

There is no such thing as a “maintenance free” home — even if projects are not obvious, upkeep should be budgeted for and considered on a yearly basis. An article written by AJ Dillinger for bankrate.com cites a study from Zillow and home renovation Thumbtack, which  “found that essential home maintenance projects average $6,413 annually.” (https://www.bankrate.com/homeownership/most-common-home-maintenance-costs/) In the same article State Farm recommends between 1 to 4 percent of your home’s value. The median American home sold for $436,800 in Q1 2023 so the median homeowner is going to want to set aside between $4,368 to $17,472 per year for maintenance costs .Jun 1, 2023 (https://www.bankrate.com/homeownership/most-common-home-maintenance-costs/)  

Honestly, the idea of setting aside so much money for home maintenance annually seems quite a bit more than may be possible for the average homeowner, and as financial counselors, we want to give our clients obtainable goals. While keeping an emergency fund is critical for all sorts of reasons, it might be a good idea for homeowners to put money into a separate “home emergency” account, and feed it when they can. Perhaps even automating a small amount to be deducted from their checking account each month to go to this home maintenance and emergency savings account would be a helpful suggestion for some families.  

Ultimately, just like for your body and your car, preventative care can go a long way. In an article by Terri Williams, Thumbtack economist Jack Erb states: “Like the body’s circulatory system, proactive home maintenance ensures longevity and lower costs,” Erb says.

Read about Home Maintenance Cost here.

While preparing for what you cannot expect (such as unexpected home damage caused by a a natural disaster) with some form of savings, having big systems serviced and performing seasonal or annual home checkups is good practice. Another way to prevent big surprises, even if you cannot prevent needing to spend money on big ticket items such as a new roof or new HVAC system, is to keep in mind how old different pieces of your home are — and the average lifespan for everything from your dishwasher to your roof to your smoke detectors. Budgeting for these replacements well before you reach the day your HVAC dies will protect your sanity and ultimately, your investment.