Prospective homebuyers are often prepared for high home prices and steep mortgage rates, but many may be unaware of the substantial hidden costs of homeownership. Bankrate's latest study finds that the average cost of owning and maintaining a home surpasses $18,000 annually.
The median home price in the U.S. stands at $432,812, with mortgage rates hovering around 7%, according to Redfin. First-time buyers often think the financial hurdles end after securing a mortgage and down payment. However, Jeff Ostrowski, a Bankrate analyst, emphasizes that this is just the beginning of an ongoing financial commitment.
"Really, it's just the starting line of another type of financial commitment, which is the ongoing costs of homeownership," Ostrowski said.
Bankrate's research highlights that the typical homeowner faces about $18,000 in additional annual expenses, a figure that has risen by 26% over the past four years. Over a decade, these hidden costs can amount to $180,000, catching many first-time buyers off guard.
These hidden expenses encompass property taxes, homeowners insurance, and utilities such as energy, internet, and cable. Maintenance costs also contribute significantly, potentially averaging 2% of a home's purchase price each year.
"If you paid $450,000 for your house," Ostrowski noted, "We figured that you would spend about $9,000 a year on ongoing repairs and maintenance."
Location and the home's age play crucial roles in determining these costs. Newer homes may have lower maintenance expenses compared to older homes, which might require more frequent and costly repairs.
For buyers, particularly first-time homeowners, planning for these hidden costs is essential. Ostrowski advises setting aside funds beyond the down payment to cover unexpected repairs and emergencies.
"You've been accustomed to socking away money for the down payment," he said. "Now you need to sock away money for your emergency savings account so that you can afford to pay for some of these repairs without putting it on a credit card."
Additionally, Ostrowski recommends a thorough home inspection to identify potential expensive repairs early on.
In summary, while the journey to homeownership is an exciting milestone, being financially prepared for ongoing costs is crucial to avoid unexpected financial strain. Proper planning and budgeting can ensure a smooth transition into this new chapter of life.