Costs of Owning a Home

Buying a home could very well be the biggest purchase of your life—but do you know the actual costs that come with owning a home? From the costs associated with the purchase to the purchases you’ll have to make down the line, owning a home costs more than simply your monthly mortgage payment.

Costs of Purchasing Your Home

There are more costs associated with buying your home than simply the down payment. The down payment is probably the largest initial cost you’ll take on, but don’t be blindsided by the additional fees you’ll need to pay. You can find out how much home you can afford with our home affordability calculator.

Down Payment

Historically, the magic number for a down payment has been 20% of the home’s value. However, the median down payment on a conventional loan in 2018 was 13%.

So 20% may no longer be standard, but anything less, and you might be paying Private Mortgage Insurance (PMI) on top of your monthly mortgage. Around half of all first-time buyers pay mortgage insurance.

PMI can make it possible for many buyers to afford the down payment, while protecting the bank’s investment if you default on the loan. The downside of PMI is the additional payments you’ll need to make each month until you are eligible to remove this insurance from your mortgage payment.

On the other hand, it could be tempting to make as large a down payment as possible—but that’ll leave you little wiggle room financially for the additional costs associated with your home down the line. If you make a large down payment, it can help to have funds reserved for emergencies and unexpected home repairs.

Closing Costs

Your down payment won’t be the only thing due on closing day. In addition to the down payment, you’ll be expected to cover closing costs. Closing costs typically cover things like:

•  Title insurance

•  Title search fees

•  Appraisal costs

•  Escrow or attorney fees

•  Surveying

•  Lender fees

Closing costs can vary based on factors such as the purchase price of your property, but you can expect to pay an estimated amount somewhere between 2% to 5% of your home’s purchase price in closing costs.

Home Ownership Costs

You’ve got the deed and the keys, so now what? Beyond the standard mortgage payments, there are some extra costs you may want to save for.

Mortgage Payment

Your monthly mortgage payment is a few different payments rolled into one single bill. Your mortgage payment might include some or all of the following:

Principal: This is the repayment of the initial loan you took out to purchase the home. Paying the principal is paying off the remaining balance of what you owe on your home.

Interest: Depending on the terms of your mortgage, the interest could be fixed or variable.

Property Tax: If your mortgage has an escrow account, a portion of your mortgage payment will go towards your annual property tax bill. Property tax is paid to your local government and typically goes towards funding public schools, public works, libraries, parks, city government, and maintenance. The amount of property tax you’ll pay is calculated as a percentage of the value of your property. The percentage varies by location.

Insurance: If you’re paying into escrow, you’ll pay a portion of your homeowner’s insurance policy each month instead of a lump sum once a year. You’ll work with your insurance provider to determine the coverage of the policy, but standard home insurance typically provides protection against certain unexpected events, like damage caused by a fire or a break-in. Policy specifics will vary.

PMI: If your initial down payment was under 20%, you may be responsible for PMI. This payment can be anywhere from 0.25% to 2% of your annual loan amount.

Utilities

Unlike a rental where you may only pay gas and electric, when you own a home, you’re on the hook for all utilities, including water, gas, heat, electricity, sewer, and trash/recycling. Utilities will vary based on your location, as well as the size of your home, but the national monthly averages are as follows:

•  Electricity: $183

•  Water: $40

•  Internet/Cable: $100

•  Gas: $82

•  Garbage, Sewer, & Recycling: $12-$20

•  Internet: $47

These figures vary based on area and activity, but taking steps to save energy on heating and cooling could lower your monthly bills. Depending on where you live, utility providers might offer an option to set a fixed rate for the year, so you’ll pay the same amount each month instead of paying a bill that varies with the change in the seasons.

Improvements & Repairs

Your dream home might just be a few renovation projects away, but remember to factor the cost of those updates into the true cost of owning your home. Not only that, but strategic improvements can greatly increase the resale value of your home.

The cost of home improvement projects vary widely based on what you’re working on. According to HomeAdvisor’s 2018 State of Home Spending Report, the average homeowner spent $7,560 last year on home improvement projects.

Each homeowner has different motivations for their work, but in the past year, owners have spent more time on improving their home than simple maintenance.

You might be budgeting for future home improvement projects, but don’t forget to include a cushion for emergency repairs. According to the same HomeAdvisor report, one in three owners reported having to pay for an emergency project—the average cost coming in at $1,206 .

Maintenance

Home maintenance entails the general upkeep of things like your property’s systems, structures, and appliances.

Upkeep costs can be more predictable than some repairs. According to HomeAdvisor, homeowners spent an average of $1,105 on home maintenance in 2018. This could be anything from having the furnace and HVAC serviced to pest control treatments on your home’s exterior.

A variety of these projects can be DIY-ed, but you’ll want to budget in the cost of tools and supplies.

You can’t predict the exact lifespan of your appliances and home systems, but a general idea can make it easier to anticipate future costs. When you buy your home, take note of how old the appliances and other systems are, so you can have a better idea of when you’ll need to replace them.

For example, windows generally need to be replaced every 20 to 30 years, while carpets benefit from being replaced every five to 10 years. Consider the outside structure of the house too, like the roof, siding, and gutters. It may be helpful to get a quote from a contractor for any larger repairs or renovations you plan to complete too.

Don’t Let Your Mortgage Cost You

The cost and time it takes to upkeep a home can be staggering, so don’t let your mortgage provider cost you even more time or money with complicated systems or hidden fees.

SoFi offers mortgage loans with competitive rates and a simple platform that can relieve some of the stress associated with home ownership.

Find out more about applying for a mortgage with SoFi.

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