Hidden Costs of Buying and Owning a Home

For many, buying a home is an exciting milestone. It represents independence and a place to call your own. While many buyers often focus on mortgage payments, the hidden costs of buying a home can add up in ways that might not be obvious at first. These hidden expenses, ranging from home inspection fees and closing costs to property taxes and emergency repairs, can quickly add up.

However, with the right planning, these expenses don’t have to put a strain on your household finances or catch you off guard. Understanding and preparing for these costs in advance can help buyers and homeowners ensure they can comfortably afford their homes—not just today but for years to come.

Hidden costs of buying a home

It’s common to plan for the down payment and mortgage payment. While they may be the biggest upfront expenses, they’re not the only ones. Before getting the keys, buyers need to cover several upfront costs. 

Home inspection and appraisal fees

Two key steps before closing, an inspection and an appraisal, help ensure buyers understand the condition and value of their home.

• Home inspection costs: A home inspection is a professional evaluation of the property’s condition. It typically averages between $450 and $550 but can vary based on property size and additional services. If any potential problems are found during the inspection, the responsibility for resolving them is usually negotiated between the buyer and seller.
• Home appraisal costs: This is an assessment required by lenders to determine the property’s market value and usually ranges between $350 and $450.

While these costs add to your upfront expenses, they help ensure your home is a sound investment. And if an inspection reveals damage or costly repairs, you can decide whether to renegotiate or move on.

Closing costs and title fees

Beyond the down payment, closing costs and title fees can add thousands to your upfront homebuying costs.

• Closing costs: These fees cover loan origination, title insurance, lender fees and escrow services. They typically range from 2% to 6% of the home’s purchase price, depending on location and lender requirements. Also, remember that cash buyers still pay closing costs, not just those who need financing. In some cases, a portion of closing costs can be negotiated for the seller to assume.
• Title fees: These include title search and title insurance, which protect both the buyer and the lender from potential ownership disputes or unpaid claims on the property. Title-related costs typically range from $1,000 to $2,500, though fees may vary.

Closing costs can be significant. The average closing cost on a single-family home falls between $6,000 and $18,000. However, many lenders provide estimates early in the process, helping you budget accordingly.

Moving and post-purchase costs

Relocating to a new home comes with additional costs that buyers don’t always anticipate.

• Moving costs: Hiring professional movers for a local move costs about $1,700 on average. Prices can vary depending on the size of your home, number of movers needed, and distance between locations.
• Furniture: On average, new home buyers spend just over $5,000 on new furnishings in the first year after a move.
• Home warranty cost: Many buyers purchase a home warranty for added protection. It helps cover the repair or replacement of major home systems like HVAC and electrical systems. A home warranty averages about $1,000 a year but can vary.
• Initial maintenance and repairs: Some new homeowners may want to make immediate changes like painting, flooring updates or appliance replacements. These costs can vary depending on the changes you want to make, so factor them into your budget.

Being prepared for these expenses can help ensure a smoother transition into your new home without having a major impact on your savings.

Tiny homes aren’t always cheaper

Some buyers consider tiny homes as a way to save money. But tiny home costs can be surprisingly high when factoring in land, utilities and zoning requirements. The national average for a tiny home is around $46,000 but can go as high as $240,000 if they require custom utilities and waste management systems. It can also be more difficult to get a mortgage for a tiny home.

Hidden costs of home ownership

Homeownership costs go beyond just making the mortgage payment. Ongoing expenses, both expected and surprising, can impact your budget over time. Estimates of these hidden costs can average over $18,000 a year. Understanding these costs upfront can help you plan ahead and avoid financial strain.

Mortgage payment

Even with a fixed-rate mortgage, your monthly payment can fluctuate over time due to escrow adjustments, which are used to pay property taxes and insurance.

• Property taxes: As home values rise, property taxes can increase, leading to higher escrow payments. Rates depend on location. Homeowners in states like New Jersey and Illinois pay the highest rates in the country, whereas Alabama and Nevada are among the lowest.
• Home insurance costs: Homeowners insurance premiums can go up annually, which can impact your mortgage payment. Average home insurance costs have increased in recent years, with consumers paying an average of just under $2,000 per year in 2024.

These costs can change over time, depending on a variety of factors. For example, the U.S. Department of the Treasury recently found that homeowners living in zip codes impacted by substantial weather events pay far more in home insurance premiums than those in areas less affected by weather.

HOA fees and special assessments

If you’ve bought a home in a planned community or a condo, some of the hidden costs of home ownership include homeowners association (HOA) fees and unexpected assessments.

• HOA fees: These fees cover various expenses related to maintaining community common areas, amenities and services. These tend to be a monthly fee on top of your mortgage payment and are paid to the homeowners association. The average HOA fee is $170 per month, though these can range from $50 to over $1,000 per month.
• Special assessments: If a building or community requires major repairs, such as a new roof or structural needs, homeowners may be charged additional fees to cover these repairs.

Understanding HOA rules before buying and factoring those costs into your budget can help you get a better sense of affordability and avoid costly surprises.

Ongoing maintenance and repairs

A common rule of thumb is to budget between 3% and 5% of your home’s value annually for maintenance. Putting aside these funds can help you cover:

• Routine upkeep: You may need regular lawn care or snow removal, plumbing fixes and appliance maintenance. These may have low regular fixed costs or cover small-dollar repairs.
• Major repairs: These costs can run into the thousands.
  • A roof replacement can cost $5,400 to $19,800.
  • HVAC repairs often start at between $75 and $150 per hour, in addition to parts, tune-ups and diagnostic or emergency fees.
• Home remodel cost: Another cost to consider is if you want to do any significant remodeling or upgrades to your home. Depending on the project, these costs can range from a few thousand dollars to nearly $90,000 (or more).

A home warranty may help offset some of these repairs but doesn’t cover everything. Also, review your homeowners insurance to determine which, if any, repairs are covered.

Home security and title protection

Many homeowners invest in home title lock services or security systems for added protection of their property and valuables.

• Home title lock cost: Some homeowners opt for additional title protection services to guard against fraud and alert them of suspicious activity. These fees may range from 0.1% to 2% of the home’s price.
• Security system installation and monitoring: Home security can range from smart locks to cameras and regular monitoring, and costs can vary depending on where you live, the size of your home and your preferred coverage. The average cost of installing a security system is about $750, and you may incur additional fees for equipment and monthly monitoring.

These expenses are optional, so they don’t have to be something to budget for right away. If you’re thinking about a security system, your homeowners insurance may offer discounts.

How to budget for hidden costs

Planning ahead can make a huge difference in helping you manage the hidden costs of homeownership and avoid surprises. Whether you’re preparing to buy or already own a home, a few key strategies can help:

• Use a “hidden costs of buying a home” calculator: Online tools can help estimate total expenses beyond the mortgage, factoring in insurance, taxes and maintenance.
• Consider building an emergency fund: Experts recommend setting aside three to six months’ worth of home-related expenses to cover unexpected repairs or fluctuations in costs like property taxes.
• Plan for rising costs: While it’s not always the case, property taxes and insurance can increase over time. So, budgeting for gradual increases rather than assuming costs will stay the same can help avoid surprises and ensure you’re covered.
• Explore seller-paid closing costs: Some buyers can reduce their upfront costs by negotiating with sellers to cover a portion of closing costs as part of the deal. Work with your real estate agent to see if it’s an option.

Factoring in some of these costs ahead of time can help you prepare for the long-term financial commitment of owning a home. If rising costs are putting a strain on your budget, a mortgage refinance may be an option to lower your monthly payment or secure a better interest rate. Many homeowners refinance to adjust their loan terms, reduce long-term costs or access home equity for major expenses.

Plan for the true cost of homeownership

Buying a home is an exciting step, but costs don’t stop at the mortgage. From property taxes to maintenance and repairs, these expenses can add up. Planning ahead and budgeting for hidden costs can help you keep your finances on track.