What are the true costs of owning a home?
What are the true costs of owning a home?
Costs of owning a home
The costs of home ownership extend far beyond the initial purchase price. One-time costs typically include a down payment, appraisal, home inspection, and closing costs. Common monthly costs of owning a home include mortgage payments, insurance, property taxes, utilities, and home maintenance.
Your actual cost of home ownership will depend on the property location, size, age, and condition, as well as your personal preferences and lifestyle.
| Type | Average cost |
|---|---|
| Upfront costs | |
| Appraisal fee | $300 – $900 |
| Home inspection fee | $250 – $500+ |
| Down payment | 0% – 20% of the home purchase price |
| Closing costs | 2% – 6% of the home purchase price |
| Moving costs | $900 – $9,500 |
| Ongoing costs | |
| Mortgage payment | $1,600 – $3,000+ per month |
| Homeowners insurance | $150 –$270 per month |
| Utility costs | $500 – $600 per month |
| HOA, CDD, or condo fees | $100 – $500 per month |
| Home maintenance costs | 1% – 4% of home value (annual) |
| Property taxes | 0.5% – 1% of the mortgage balance (annual) |
| Home improvements | Varies |
Upfront costs of home ownership
Before even stepping foot into your new home, you'll need to cover several upfront costs. These typically include:
| Type | Average cost |
|---|---|
| Appraisal fee | $300 – $900 |
| Home inspection fee | $250 – $500+ |
| Down payment | 0% – 20% of the home purchase price |
| Closing costs | 2% – 6% of the home purchase price |
| Moving costs | $900 – $2,800 (local) $1,300 to $9,500 (long distance) |
Home appraisal
A home appraisal costs $350 to $600 on average for standard home loans, depending on the property size, location, and appraiser experience. Lenders require a home appraisal to assess the property value and ensure they don't approve a loan for more than what the house is worth.
Home appraisals for FHA and VA loans typically cost more—about $400 to $900—due to the extra standards they require.
Home inspection
A home inspection costs $250 to $500+, depending on the home's size and location. This inspection is essential for the home buyer to identify any potential issues or necessary repairs before finalizing the purchase.
Down payment
Many lenders require a down payment of at least 20% of the home's purchase price on conventional loans. For a $400,000 home, that would be $80,000. If you pay less than 20% down, you’ll end up paying more per month in private mortgage insurance (PMI) fees.
Some programs specifically offer down payments, such as 3.5%to 10% for FHA loans or 0% for VA loans for qualifying individuals.
The Federal Housing Administration (FHA) loan program and its lower down payment requirements help make home ownership possible for individuals with lower credit scores, previous bankruptcy, or other financial issues that would otherwise put home ownership out of their reach.
Closing costs
Closing costs typically range from 2% to 6% of the home's purchase price, which comes to $8,000 to $24,000 for a $400,000 home. These fees cover various expenses required to complete the home purchase, such as appraisal fees, title insurance, and lender fees. Closing costs are the buyer's responsibility in most cases.
Sellers may offer to pay some of the closing costs if the home has been difficult to sell. However, most lenders put limits on how much of the closing costs a seller can cover.
Moving costs
Whether you're moving locally or long-distance, the cost of relocating can be substantial and an easy detail to forget when you're house shopping. The average cost for a local move ranges from $900 to $2,800, while a long-distance move costs $1,300 to $9,500, depending on the distance and weight.
Alternatively, moving truck rental costs $20 to $500 per day.
Ongoing / Monthly costs of owning a home
Once you've moved into your new home, you'll need to budget for several ongoing expenses:
| Type | Average cost |
|---|---|
| Mortgage payment | $1,600 – $3,000+ per month |
| Homeowners insurance | $150 –$270 per month |
| Utility costs | $500 – $600 per month |
| HOA, CDD, or condo fees | $100 – $500 per month |
| Home maintenance costs | 1% – 4% of home value annually |
| Property taxes | 0.5% – 1% of the mortgage balance annually |
Mortgage payment
Your mortgage payment is the most significant ongoing cost, which typically includes the principal, interest, taxes, and insurance, also called PITI. Research shows the median monthly mortgage payment in May 2024 was $2,858. However, monthly payments range from $1,600 to $3,000+ depending on the down payment, interest rate, and loan terms.
Other factors that can affect your monthly mortgage payment include:
Private mortgage Insurance (PMI): If your down payment is less than 20%, most lenders require PMI, which adds 0.5% to 1% of the loan amount to your monthly payment. Once you pay off about 20% of your loan, you can petition your lender to remove the PMI.
Mortgage Protection Insurance (MPI): This optional insurance costs 0.5% to 1% of your mortgage balance annually and helps cover your mortgage payments if you become disabled or lose your job.
Mortgage points / discount points: Some homebuyers pay an extra fee up front to lower the loan's interest rate. One point costs 1% of your loan amount and lowers the interest rate by up to 0.25%, which may be a good move if you plan to stay in the home long-term.
Property taxes
Annual property taxes are an unavoidable cost of owning a home and vary from 0.5% to 2% of your home's assessed value, depending on your state and city or county. While property taxes are typically paid in one annual payment, some lenders roll the cost into your monthly mortgage payment.
HOA, CDD, & condo fees
If your home is part of a homeowners association (HOA), community development district (CDD), or condominium, you'll need to pay monthly fees to help maintain the property, community infrastructure, common areas, and shared amenities. These fees typically range from $100 to $500 per month depending on the specific amenities and services provided.
Homeowners insurance
Homeowners insurance protects your home and belongings from damage or loss due to unexpected events like fires, storms, and theft. Your annual cost depends on the home's location, value, your risk profile, and the coverage level you choose.
Home insurance costs $1,800 to $3,200 per year, or $150 to $270 per month on average.
Condo insurance costs $400 to $700 per year, or about $35 to $60 per month.
Many insurance companies add $5 to $10 per month if you choose to spread the payments out over the year.
Utility costs
Utilities cost about $6,000 to $7,200 per year in the U.S., or $500 to $600 per month on average, including water, sewer, gas, electricity, phone, internet, and cable TV or streaming services. Costs vary depending on the home's size, location, efficiency, and household usage.
Home security
While installing a security system is not a requirement of owning a home, it can provide peace of mind and potentially lower your insurance premiums. The average cost of a home security system package with installation is $199 to $900, with ongoing monitoring fees ranging from $25 to $50 per month.
Maintenance & repairs
Some of the hidden costs of home ownership are in the money you'll need to spend to maintain it. Experts recommend budgeting 1% to 4% of your home's value annually to cover typical home maintenance costs, such as lawn care, house cleaning, pest control, and appliance repairs.
Here's a breakdown of the recommended maintenance budget based on your home's value:
| Home value | Average annual maintenance cost |
|---|---|
| $350,000 | $3,500 – $14,000 |
| $400,000 | $4,000 – $16,000 |
| $450,000 | $4,500 – $18,000 |
| $500,000 | $5,000 – $20,000 |
| $550,000 | $5,500 – $22,000 |
If you're buying an older home, budget on the higher end of the recommended range and add 1% to 3% for major emergency repairs or replacements.
Improvements & renovations
Long-term home ownership typically involves periodic updates as components and systems age, or as needs and preferences change. Whether it's updating the kitchen, replacing the roof, or adding a deck, home improvement costs can quickly add up. However, these investments help maintain—and may even add to—your home's value.
Consider the age and condition of the home to estimate how much you should budget for potential home renovation costs.
Home ownership cost factors
Several factors can influence the overall cost of home ownership:
Location: The cost of living, property values, and tax rates vary significantly between neighborhoods, cities, and states. Geographic location and climate also impact a home's maintenance requirements.
Home size & age: Larger and older homes require more maintenance and have higher utility costs.
Build materials: Material type and quality of a home's structure and features affect how quickly components and systems require replacement.
Loan terms: The interest rate, loan duration, and down payment amount can significantly impact your monthly mortgage payment.
Lifestyle & preferences: Your lifestyle, desired amenities, and home improvement plans will influence your overall expenses.
FAQs about home ownership
Is owning a home worth it?
Owning a home can be worth it for those seeking stability, equity-building potential, and control over their living space. However, it requires significant upfront and ongoing costs, making it crucial to carefully evaluate one's financial readiness and long-term goals before committing to home ownership.
Can you own a home and be on Medicaid?
In most cases, owning a home does not disqualify you from Medicaid eligibility, as your primary residence is typically exempt from asset limits. However, the value of other real estate properties you own may be counted towards Medicaid's asset limits, potentially affecting your eligibility for benefits.
What are the tax benefits of owning a home?
Homeowners may be eligible for tax deductions on:
Mortgage interest
Mortgage discount point costs that lowered your interest rate
Mortgage insurance premiums
Property taxes ($5,000 to $10,000, depending on whether you file single or jointly)
Energy-efficient home improvements
Home office expenses if part of the home is dedicated for business use
Necessary home improvements (for example, medically necessary accessibility updates)
Capital gains from the sale of your primary residence (provided you lived in the house 2 of the last 5 years)
Do you own your home if you have a mortgage?
Yes, you own your home if you have a mortgage. However, you also own the debt, and your home is the collateral. This means the lender has a legal claim on your property until the debt is paid, but you own the home and the equity you build.
How to prepare for the cost of home ownership
Owning a home is a significant milestone and a dream for many. Follow these guidelines to ensure you're ready for the financial responsibilities of home ownership:
Create a detailed budget and set aside funds for upfront and ongoing costs.
Build an emergency fund to cover unexpected repairs or maintenance.
Consider the long-term implications of home ownership on your financial goals.
Seek professional advice from a financial advisor or real estate professional to understand the full scope of costs and make an informed decision.
Using our proprietary cost database, in-depth research, and collaboration with industry experts, we deliver accurate, up-to-date pricing and insights you can trust, every time.