The Hidden Costs of Buying a Home

Be prepared for these unexpected costs

Young girl putting up a painting in her new home
Photo: Marko Geber / Getty Images

If you're a first-time homebuyer, don't be surprised by how much it costs to buy and take care of a home. Some costs that come along with buying a home are predictable, such as your mortgage payment. But then there are other costs of owning a home that may take you by surprise. These may include property taxes, insurance, utility bills, and more. U.S. homeowners can spend thousands of dollars per year on these hidden home purchase and maintenance costs.

You don't want to fall in love with a home only to find out that living there will cost more than you can afford. Learn several overlooked costs to prepare for before you start looking for a home.

Key Takeaways

  • Closing costs, which include taxes, escrow payments, and various fees, are typically 3% to 4% of the total cost of the home.
  • Regular home upkeep, such as cleaning, yard care, and repairs, can total at least 1% of your home's value every year.
  • Property taxes vary by city or even neighborhood. If you believe that your costs are higher than they should be, you can appeal your tax assessment.
  • Utility costs, home insurance, and maintenance can add thousands of dollars to your housing expenses every year.

Closing Costs

Closing is the last step in the mortgage process, and many people tend to underestimate how much it can cost. When closing occurs, your loan has been approved, your home inspection is done, and you're ready to get your keys. Once your purchase is complete, you'll have a closing meeting to sign your final papers and pay for a laundry list of costs. These include:

The U.S. Department of Housing and Urban Development estimates the costs to average between 3% and 4%. Typically, these costs will vary from state to state. For instance, one county might charge $2 per page for recording fees, while another might charge $5.


The first loan estimate you get will have a ballpark figure for your total closing costs, but they won't be official until closing time.

Home Maintenance

You should plan on paying at least 1% of your home's value in upkeep costs every year, according to the 1% rule. However, that number will vary. Some of the most common maintenance issues are house cleaning, yard care, gutter cleaning, and pressure washing.

Prices can vary widely based on the area. Your agent and home inspector can help you figure out what routine jobs will cost in your area when it comes to first-year costs. Sites such as Angi and Thumbtack can also help with estimates.

Property Taxes

Property taxes are something every homeowner will have to pay, and they don't just vary by state. They also vary by city and increase or decrease based on city, county, or neighborhood. The Tax Foundation has a property tax data lookup tool by county, which you can use when planning costs.

When buying a home, if you believe that your property taxes are higher than they should be compared with other homes in your area, you can ask for an appeal of your tax assessment. In some areas, you might need legal help to do that, or you can do it yourself and save the fees.


Utility costs can be as high as property taxes, Wacksman noted, and they are often not thought about until after a homeowner buys the home. For example, electricity can cost around $100 per month or more.

The total cost of utilities will vary with climate, local costs, and certain appliances. For example, the U.S. Energy Information Administration (EIA) reports annual costs that range from close to $2,000 in Hawaii to $963 in Utah. The EIA's latest report in November 2021 shows that in 2020, the national monthly average cost for electricity was just over $117.


To get a clear sense of what to budget for utilities, ask a friend with a home in the area to give you a peek at their monthly bills. Be sure to adjust for the size of their home compared to the one you're buying.

Homeowners Insurance

If you're taking out a mortgage, you'll be required to have homeowners insurance. But even if you pay cash for your home, you should have it anyway. You should aim to get a replacement cost policy. This type of plan will cover the cost of replacing the items that get stolen or damaged in a fire, rather than one that gives you the depreciated value of the items lost.

According to the Insurance Information Institute, the average yearly cost for home insurance was $1,272 in 2019, the most recent year with data. Premiums will vary based on your area and the value of your home. You can save yourself a large amount by shopping around both online and in person. Ask about what discounts you can get, including discounts for security systems and bundling coverage for your home with your auto policy.

It's also important to be aware of the things home insurance won't cover. Policies tend only to protect your home and the items within. But if you're buying a condominium, the co-op might require a liability rider for accidents on any shared property. If you're in a flood zone or an area with a high risk of earthquakes, you'll need more protection.

Homeowner's Association Fees

Not all neighborhoods have a homeowner's association, but if the home you're looking at does, you'll need to be ready to pay your dues. Homeowner's associations (HOAs) exist to maintain a neighborhood's attractiveness and appeal. They are generally run by homeowners in the neighborhood. Fees are intended to cover common area maintenance and upkeep and maintenance on the entrance sign and area. Rules keep the neighborhood looking a specific way.


If you're uncomfortable with being told how to maintain and live in your home, you may not enjoy a home that's part of an HOA. However, if you don't mind following rules, an HOA neighborhood can be an enjoyable place to live.

Depending on the neighborhood you're looking into, fees could range from $100 to thousands of dollars per year. Fees depend on the amenities and services in the neighborhood—if there is a pool, playground, outdoor fitness area, or anything else provided for residents, there will be HOA fees that cover the costs.

Heating, Ventilation, and Air Conditioning

Heating, venting, and air conditioning (HVAC) systems keep your home cool when it is hot outside and warm when it is cold. These systems are mechanical and run continuously, which means they have measurable failure rates and can develop issues.

HVAC system maintenance is expensive—depending on your area, you might pay $150 for a technician to come and troubleshoot your system. A refrigerant recharge can cost hundreds of dollars, and unit replacements cost thousands of dollars.

HVAC systems will also be the main reason your electric bill is so high. Depending on how much it operates, it can cost you hundreds of dollars per month to cool and heat your house.

Lawn and Lot Care

Nearly every homeowner has some form of maintenance work to perform on the land their house is on. When buying a home, maintenance is something to consider. Homes with lawns and large lots can require a lot of time and commitment to maintain. The maintenance also comes with the costs of equipment like lawnmowers, weed eaters, chainsaws, wheelbarrows, and even trips to the local landfill to dispose of yard waste—unless your local disposal companies have yard waste collection days you can pay for.

The costs for gas, oil, and parts for lawn care equipment can continue to eat away at your savings unless you account for them in your budget.


Most homes come equipped with appliances unless you're buying a newly built home that doesn't. Sometimes, used home sellers take the appliances with them. Generally, you'll need to buy a washer and dryer for your laundry when you buy a home because those appliances can be taken. Most contracts stipulate leaving the stove, refrigerator, and dishwasher; usually, the microwave stays if it's attached to a cabinet.

However, appliances break frequently. It's not unusual to have to replace at least one of the appliances in your home every year or so.

The Roof

A home's roof generally goes unnoticed until there is a problem. Shingles have lifespans and become brittle over time with exposure to the elements. They can break and blow off in the wind, or may have been put on sloppily, and the roof can begin to leak.

Generally, an asphalt shingle roof needs to be replaced every 12 years on the low end and about 20 years on the high end. If you're buying a home that's close to an increment of those numbers, you might need to watch the roof and be prepared to pay close to or more than $10,000 for a new one.


Generally, home insurance doesn't cover roof repairs unless it is caused by a natural disaster or event that is outside of the owner's control—as long as it is an insurable event mentioned in your policy.

Your Credit Score

Your credit score allowed you to buy a home using a loan. The lender accessed your credit history and determined you're able to make payments and are reliable enough to give the loan to. However, once your credit history and report are pulled, you lose points on your credit score, which takes time to build back up.

This means that once you buy a home on a mortgage, you may need to wait until you have made enough mortgage payments to raise your score again to be approved for another loan. This may not be an item that costs you cash, but if you were counting on another loan shortly after buying your home, it could cost you if you didn't account for the drop in credit.

The Bottom Line

Buying a home is a big purchase, and the hidden costs of buying one might be shocking if you're a first-time buyer. As much as possible, you want to avoid being caught by surprise. Before you buy a home, make sure you know what you're getting into—and whether you can afford the payments and the upkeep.

Frequently Asked Questions

What hidden costs are associated with home ownership?

Closing costs, insurance, maintenance, repairs, utilities, and taxes are most commonly the unexpected costs of ownership, but there are many more.

Is buying a house a good investment?

The argument for a house being a good investment is subjective because it depends upon a person's circumstances and financial goals. You might only be buying it because you want to live in it, making it a good investment. You might buy it with the intent to live in it and sell it after it appreciates, making it a good investment because home prices can go up. On the other hand, a home might not be a good investment for someone that enjoys a frugal lifestyle or the freedom to move around.

What are the disadvantages of owning a home?

Some of the disadvantages to owning a home are the extra expenses that come with ownership and being tied down by that ownership.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. U.S. Department of Housing and Urban Development. "Common Questions From First-Time Homebuyers."

  2. U.S. Energy Information Institute. "2020 Average Monthly Bill- Residential."

  3. Michigan Department of Insurance and Financial Services. "Homeowners Insurance Replacement vs. Repair Cost Policies."

  4. Insurance Information Institute. "Facts + Statistics: Homeowners and Renters insurance."

  5. Waypoint Property Inspection, LLC. "How Often Does Your Roof Need To Be Replaced?"

  6. Bill Ragan Roofing Company. "The Average Cost To Replace a Roof: Which Roofing Material Fits Your Budget?"

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