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The hidden costs of homeownership

Fact-checked with HomeInsurance.com

If you are in the market to buy a new home, there are a lot of costs to consider than a house’s list price. Interest rates, moving costs and living expenses are just a few of the true costs of owning a home. 

Here are the costs associated with buying a home that you’ll need to keep at the forefront of your mind while you’re planning and shopping for a home. 

Upfront costs to consider

Closing on a home requires more than just a down payment as far as upfront costs are concerned.  When you buy a new house, you need to factor in a lot of costs. We discuss the following more in-depth:

  • Moving costs
  • Closing costs
  • Down payment
  • Fees and property taxes
  • Mortgage points (if you want to lower your interest rate)
  • Lender fees

In addition to these expenses, you’ll want to take a hard look at your personal moving scenario. What obstacles might you (and your family) have? Depending on your unique situation, your moving costs may be more complex. Accounting for all expected up-front costs can help you be prepared financially so you don’t incur unnecessary debt or added out-of-pocket costs.

Moving costs

Movers can cost between $25-$150 an hour depending on the number of movers you hire and what equipment and supplies are provided by the moving company. The amount of time it takes them to move your belongings of course depends on the volume you are moving. A good average is to expect for half a day of labor (4-6 hours). Hiring a bigger crew may save you in time and potentially money, so don’t be afraid to consider that option. 

If you just want them to move your packed stuff from point A to point B, you may either be charged per mile, per pound, or a combination of both. 

Questions to ask while shopping around for movers include the following:

  1. How big is your crew?
  2. How much is it per hour per crew member?
  3. Estimated moving time?
  4. How much to drive your belongings to your new home? How do you charge for transportation?
  5. Estimated final bill? 

Closing costs

Whether you’re the buyer or the seller, purchasing a house typically involves closing costs. One good thing about being the buyer instead of the seller is that realtor fees are usually the seller’s responsibility. Closing costs generally include mortgage insurance, appraisal fees, property taxes, and homeowner’s insurance. Typically these costs amount to 2-5% of the purchase price of the home. To get a more accurate picture of what you can expect, discuss the details with your lender. 

Down payment

The down payment amount depends on the type of loan you obtain, your credit score, whether you want to avoid mortgage insurance (which usually requires a 20% down payment) and what you would like your monthly mortgage payment to be. 

If you plan on using an FHA loan for example, you can expect to make a 3.5% down payment. However, if your credit score is between 500-579, you may need to put 10% down. Other loans, such as the VA loan, do not require any down payment at all. Those who would like a lower monthly mortgage rate may put more towards the down payment to reduce the overall loan amount. 

Fees and property taxes

Real estate taxes (a type of ad valorem tax) and any fees that are charged by the city, county or state of which you are moving to will also be part of the upfront costs. Ad valorem is translated ‘according to value,’ which in this case means you’ll be taxed according to your new home’s perceived value. In addition to these taxes, you may also have to pay a real estate transfer fee, depending on where you live. 

Whether you pay these taxes and fees monthly or quarterly is also determined by your home’s location. It will be the same amount either way, but you’ll need to take that into consideration when calculating your final budget. 

Mortgage points

Mortgage points are a way to lower the interest rate on your mortgage, which in turn could save you money over time. Each ‘point’ equates to roughly 0.25% of the mortgage rate. To purchase a point, you pay 1% of the loan amount (keep in mind that doing so does not lower the loan amount because it’s considered an optional fee).  

Other fees

Your lender will charge you a fee for the initial application, the underwriting and the loan origination. These fees are usually accounted for during closing. The amount of lender fees varies from lender to lender, so it’s always wise to shop around or even negotiate when possible. 

Homeowners insurance

When you purchase a home with a loan, it will be necessary to procure homeowners insurance before you can close. This cost raises your total monthly payment, but it is a required expense as it protects both you and the lender should something happen to your home. 

As with everything, we recommend shopping around for an affordable policy that includes coverage to fit your needs. Each provider has different pricing algorithms that affect the total cost of your premium. For example, one provider may charge you more because of your credit score and marital status, while another may not. 

However, also keep in mind your premium can change over time as you become eligible for new discounts or as other discounts expire, but you may be able to significantly save initially for bundling policies or just qualifying for new home discounts.

The main things you’ll want to look at when purchasing homeowners insurance are policy limits, covered perils (and any exclusions that apply) and liability limits. Knowing if your new home is in an area prone to hurricanes, flooding, earthquakes or other natural disasters will affect the required amount and types of coverage you need. The most important thing is knowing exactly what your policy covers and what it excludes. For more information, read What Does Homeowners Insurance Cover? These factors all ultimately affect your cost of homeowners insurance.

Mortgage payments

Depending on what type of interest rate you choose, your payment could either be fixed or variable. Most people opt for fixed interest rates so they know exactly what their payment is going to be every month until the loan is paid off. For example, if you choose a 30 year mortgage, both the first payment and the last payment are going to be the same (unless you choose to refinance). 

Should you choose a variable interest rate (also referred to as an adjustable rate mortgage or ARM), the amount of interest you pay over time can change depending on what the market is doing. A common type is a 5/1 ARM, where your payments are locked in for 5 years, but then every year thereafter they are subject to change. The loan term stays the same, it’s the just the interest that may fluctuate (which in turn would affect your monthly payment. ARMs may save homebuyers money, and they may not. It all depends on the market.  

Principal and interest

Your loan ‘principal’ reflects the loan amount you take out to buy a home. The loan interest is the cost of taking out the loan to buy the home— in essence, it’s the cost of doing business with a lender. When you make a mortgage payment, you’re paying the bank for two things: the remaining initial loan amount and interest. Only once you have both figures do you know the true cost of your mortgage.   


An escrow account is set up by a third party and it retains assets or funds related to a home purchase before they are transferred from the buyer to the lender or other parties. Commonly, escrow accounts can hold closing costs and some things like homeowners insurance can be added to and paid out of escrow. 

FHA loans

FHA loans require mortgage insurance if you’re not putting 20% down. However, even once you reach 20% in equity with an FHA loan, mortgage insurance stays for the entire loan term, which is why you should strongly consider refinancing when rates are low. 

Additional homeowner fees to consider:

After you’ve closed and moved into your home, here are additional costs associated with your new home:

  • HOA fees
  • Condo fees
  • Landscaping fees
  • Furnishing and appliances
  • Utilities
  • Routine maintenance

HOA fees

HOA fees vary from community to community. They can be as low as $15 a month, for example, to as high as several hundreds of dollars. You will need to factor this expense when house hunting. While you may be able to afford a mortgage, the HOA fees may push a home out of budget. 

Condo fees

Similar to HOA fees, condo fees can vary dramatically as well. These can amount to hundreds of dollars a month, so be sure to ask what the condo fees are before you schedule a walkthrough.

Landscaping fees

Landscaping fees are almost always incorporated into your HOA fees. All the same, it never hurts to ask. If they’re separate, or you are not a part of an association but you expect to require landscaping fees regularly, you’ll want to account for this expense in your monthly expenses budget. 

Furnishing and appliances (as well as HVAC and heating)

Depending on whether or not the home comes with appliances, or whether you plan on keeping or replacing them, don’t forget to take appliance costs into account. When considering a home, inquire about the home’s HVAC system. How old is it? HVAC replacement can be a hefty expense you might not anticipate so be sure to verify its condition prior to closing on the home.


When you rent, utilities are often included in your monthly rent. The same cannot be said for owning your home. You will need to think about:

  • Water/Trash
  • Electricity
  • Cable
  • Internet
  • Phone

A good way to gauge the average cost of these utilities and services is to ask the homeowner to provide monthly averages. 


Regular maintenance tasks you can expect to pay for as a homeowner include:

  • Roof
  • Appliances
  • Plumbing
  • Mold
  • Pest control
  • Siding and window repair

As a general rule of thumb, many homeowners typically spend 1% of the purchase price each year to keep up with needed repairs. When you’re the owner, you don’t have a landlord to take care of everything for you so costs like these are your responsibility.

The takeaway

  • Buying a home requires more upfront costs than just the down payment
  • Once you’ve closed, you’ll need to consider both monthly and yearly living expenses

As you can see, the hidden costs of buying a home are extensive. In addition to the cost of insurance, closing costs and taxes, you also need to think about HOA fees, utility costs and routine maintenance. Before you buy, do the math and make sure everything is accounted for in your budget.

Lauren Ward

Lauren Ward is a writer for Coverage.com. She specializes in all things personal finance, including insurance, loans, and real estate.

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