How Much Does it Really Cost to Own a Home?
Buying a home is an expensive undertaking, with a lot of fees and hidden costs along the way. Here’s our cheat sheet for all expenses you should be prepared to take on when buying (or selling) your home.
Home Ownership Expenses
- Principal: This is your monthly mortgage payment that goes toward the loan itself.
- Interest: On top of your principal payment, you will have interest in your mortgage. The faster you pay it off the less interest you will pay.
- Taxes: Property taxes vary based on location, so this expense will look different
- Insurance: You need homeowner insurance. The price of this will vary based on location and the value of your home, so you will need to get a quote personalized to your situation.
- HOA/COA: Depending on where you live, you may have to pay a monthly fee to your homeowners association. This will affect you if you own a townhouse or a condo, or live in certain neighborhoods.
- Home Maintenance: You will never stop paying for home repairs and routine maintenance. The bigger the home, the more you’ll need to factor this in.
- Mortgage Insurance: Not every lender requires mortgage insurance, but some do. You can check out our comparison article to see what most popular lenders require.
Home Buying Expenses:
- Down Payment: This is the largest expense you will have. Different lenders have different requirements for minimum down payments (see the link above), but a good rule of thumb is to have 20% saved up. We offer a unique down payment top-off investment program for those who want to reach this goal without dealing with interest.
- Closing Costs: You may be able to negotiate to share these costs with the seller or have them pay these entirely, but you should be prepared to cover them if need be. These are typically 3-5% of your loan amount.
- Title Fees: In order to get the deed and title transferred, you will need to pay the title fees. This can be around 1% of the home value.
- Commission: If you are working with an agent, they will get commission from your purchase (which may mean a slightly higher price).
- Inspection & Appraisal Fees: You will need to pay a third party to complete a thorough home inspection and appraisal. Inspections can cost anywhere from $300-600, and appraisals are in the same price range.
- Furnishing Costs: Don’t forget about furniture. Only you can decide how much you need to budget here – but it certainly does need to be a part of the budget.
Home Selling Expenses:
- Brokerage Costs: You will need to pay a broker to help you list your home and get it on the market. Check out our article here for tips on finding a good broker! Find ways to save on your broker costs here.
- Taxes on Appreciation: If your home has appreciated in value, you will need to pay taxes on that increase. If this is your primary residence, you benefit from a tax exemption, and won’t have to pay capital gains tax on this appreciation on the first $250,000 (for a single filer) or $500,000 (for a married couple).
- Landscaping Costs: Before putting your home on the market, you’ll need to pay to get your yard looking beautiful.
- Staging: If your broker isn’t able to help you here, you may need to pay someone to stage the interior of your home for viewings.
- Repairs & Maintenance: You will need to pay contractors to handle any repairs or maintenance that must be taken care of before listing the home.
- Seller Concessions: Expect negotiations to be a part of the sales process. There may be some changes you weren’t planning on making, that the buyer requests you make before the sale is final. You will have to pay for these.
- Closing Costs: Most homebuyers will try to have the seller pay closing costs. Expect to pay at least half of these (around 3-5% of the sale price).
As you start to budget, make sure you include all these details along the way!