Managing Unexpected Expenses of Homeownership

Homeownership has become synonymous with the idea of the American dream, but nothing will keep you up at night like the unexpected expenses that owning a home can entail. A house is a valuable asset, but if you are unprepared for the added costs and maintenance on top of your monthly mortgage payments, it can also put a strain on your finances. That is why it is important to understand all the costs of owning a home so you can reduce stress and enjoy the perks that homeownership can offer.

In this article, we will help you understand the actual price of becoming a homeowner so you will not have to worry about unexpected expenses and can try to avoid unwanted surprises.

What are home expenses?

Owning a home is not as simple as just paying your mortgage each month. There are a number of other expenses homeowners need to be prepared to take on. Novice buyers are often surprised by the amount of money owning a home can take out of their wallets.

A few added costs are unavoidable, while other expenses can pop up unexpectedly. Here are some common home expenses:

1. Property taxes: Paying property taxes is one price homeowners must all pay. Though tax reductions do exist for people who own their home, your property taxes will be determined by the township, city, or county in which you reside. They are also based on the value of your home and can easily total $500 to $1,000 or more a month, and are often paid through your escrow account.

2. HOA fees: While homeowners association fees may not apply to every home, if you buy within an HOA community, you will be required to pay a monthly or quarterly fee for services provided. These can include landscaping, snow plowing, community amenities, and more. In most cases, the more services your HOA provides, the higher the fees may be.

3. Homeowners insurance: Another cost of owning a home is homeowners insurance. This will be required by your lender in order to be approved for your mortgage loan. The premiums will likely be included in your monthly mortgage payments, and are often paid through your escrow account.

4. Roof maintenance and repairs: One expense of homeownership that may take you by surprise is the roof. While a home inspection will go a long way in informing you of the home’s current structural integrity and longevity, water and weather damage can pop up when you least expect it.

5. HVAC system and plumbing: Over time, systems are worn down and your heating, ventilation, air conditioning, and plumbing is no different. In addition to frequent furnace and air conditioning filter replacements, homeowners should have their HVAC systems inspected on a yearly basis. If you are buying an older home, it is especially important to take extra care looking at the plumbing during the inspection. Pipe problems are more likely to pop up down the line, and sometimes pipes can not simply be repaired—they have to be replaced entirely.

6. Landscaping: Whether you have a green thumb or hire a professional, you will eventually be paying for outdoor upkeep. Lawn equipment is costly, and landscaping often goes beyond cosmetic additions. Gutters get clogged, falling tree limbs can cause exterior damage, and more.

Aside from the unavoidable expenses of homeownership, you may also decide to upgrade appliances or renovate rooms at some point. As thrilling as it is to own your home, it comes with a lot of responsibility as you don’t have a landlord to call on when costs and repairs become necessary.

The great news is, there are ways you can prepare for every surprise your new home might have in store.

How homeowners can prepare for unexpected costs

Whether a plumbing issue causes water damage and stress, or your expanding family requires some new additions, there is no shortage of wallet-straining home expenses. That is why it is important to take steps now to prepare for every future surprise. That way, when reality hits, you are ready for whatever life throws your way. Here is how you can get started:

Build an emergency fund

When you are buying a house, you should prepare for unexpected expenses to eventually pop up. When they do, having a dedicated emergency fund will provide a huge relief. New homeowners should prioritize setting aside extra cash. There is no one sum everyone should save, as every person’s situation is unique. However, the more you are able to set aside, the better prepared you will be for every expense. 

Creating a budget and knowing your monthly expenses will go a long way in helping you determine how much money you are able to set aside for your emergency fund.

Schedule regular, preventative maintenance

Another aspect you should calculate into your monthly home budget will be the costs of regular home maintenance. Scheduling routine inspections and upkeep for various aspects of your house (HVAC systems, roofing, appliances, and so on) is especially important if you are purchasing or live in an older home. That way, you can keep your home and amenities in top working condition for as long as possible, delaying major problems, or breakdowns. Regular maintenance will also help you identify problems before they become major repairs. These routine costs should be added into your monthly budget.

Get a home warranty

While a home warranty may not protect you from every potential expense, it is an option worth exploring. If purchasing the home leaves your savings depleted, a home warranty can offer you peace of mind while you build your emergency fund. In some instances, warranties can even be negotiated as a part of the purchase agreement! Be sure to speak with your lender or real estate agent about their recommendations on home-warranty companies.

Home expenses require preparation

Hesitation is a normal part of the homebuying process, especially when you are considering all the associated costs and unexpected expenses that come with the territory. However, going into a home purchase with your eyes open and funding strategies will help you prepare for anything that comes your way.