7 Hidden Costs of Owning a Home (and How Homeowners Insurance Can Help)

What are the hidden costs of owning a home? They often include taxes, utilities, maintenance, furnishings, yard work and insurance. Knowing how to prepare for hidden costs of owning a house can make it easier to budget with fewer surprises over time.

Quick takeaway: The ongoing costs of owning a house can add up quickly. Planning for both expected bills and less predictable repairs can help you avoid budget strain later.

Common hidden costs of homeownership

Here's a quick view of common hidden homeowners costs and how to plan for them.

1. Taxes

Property taxes are what you pay to your local government, which uses the proceeds to support infrastructure projects, like road maintenance or school construction, and to fund services, such as paying teachers to work in those schools. Taxes vary by county or municipality, but how much you owe will depend on your location, your property’s assessed value and your local tax rate.

In the U.S., the effective property tax rates range from 0.32% to 2.23%.¹ To put those numbers in perspective, say you own a home valued at $300,000. Depending on your location, you’d have to pay between $960 and $6,690 in annual property taxes.

2. Homeowners association (HOA) fees

HOAs are organizations that manage and maintain certain communities, enforcing rules and maintaining common areas, such as a community pool.

According to the Foundation for Community Association Research, approximately one-third of U.S. housing is in an HOA, or one of two similar organizations that also collect fees to maintain shared property and the like: co-ops and condo communities. In fact, in some states, most properties are part of these associations – in Florida, for example, 45% of housing falls into this category.

HOA fees vary significantly by location, community, and the amenities or services provided. In general, the monthly fees can be anywhere from $100 to $1,000 and up – with a common range being between $200 and $300 a month.

These fees are ongoing, and they can increase over time.

3. Maintenance

Maintaining a home can be a major expense, especially if you buy a property that’s been standing for decades. Your property will need ongoing upkeep and repairs, such as periodically replacing heating and cooling systems, or repairing damage to the roof.

To prepare for major repair costs, experts recommend setting aside 1% to 4% of your home's value each year for maintenance.

If your house is valued at $300,000, that means it’s recommended to save between $3,000 and $12,000 per year. These are some of the biggest hidden costs homeownership can bring, because maintenance expenses may not happen every month, but they still need to be part of your budget.

Quick budgeting tip:

• Open a separate savings account for home maintenance
• Set up automatic monthly transfers of 1-4% of home value divided by 12
• Use this fund for unexpected repairs, not routine expenses

4. Utilities

Besides your mortgage, one of your most significant ongoing expenses is utilities. Your electric, gas, water, sewer, trash, recycling, and internet and cable service can together cost you hundreds each month. In fact, the U.S. Bureau of Labor Statistics reported that homeowners spend an average of $4,625 on utilities per year, or approximately $385 per month.

5. Furnishings and décor

Purchasing furnishings, rugs, artwork and other décor can be a significant expense for new homeowners.

HomeAdvisor reported that the average cost of furnishing a home is $16,000. Depending on the home’s size and your taste, though, the cost could be substantially more. And periodic redecorating will only add to your homeowning costs.

While you’ll likely spend the most when you first move in, set aside some money each month for the future, so you can cover the cost of redecorating your bedroom or purchasing a new sofa.

6. Yard work

Yard work requires ongoing time and money, especially for homeowners transitioning from apartment living. Mowing the lawn, trimming trees and bushes, pulling weeds, and putting down new mulch can all require maintenance costs.

If you decide to do it yourself, you’ll have to purchase tools like a lawn mower, weed wacker, trimmer and a wheelbarrow. Or, if you opt to hire a service, you’ll have to pay a monthly or per-visit fee. According to HomeGuide, the cost of full-service lawn care typically ranges between $100 and $400 per month.

7. Insurance

If you have a mortgage, your lender will require you to purchase homeowners insurance to protect their interest in the property. If you’re in an HOA, you may be required to carry certain coverages and limits. Even without a mortgage, maintaining homeowners insurance on your property is strongly recommended.

Homeowners insurance premiums vary by location and that rate isn’t fixed; factors such as claim history, rising building material costs and more frequent natural disasters have led to an increase in homeowners insurance rates over time.

The role of homeowners insurance

Homeowners insurance is a valuable investment, offering the following benefits:

• Investment protection: Buying a home is a significant investment. Between the amount of the down payment and your monthly mortgage installments, you pay thousands to become a homeowner. A homeowners insurance policy protects that investment – and will be required by the mortgage company. If your home is damaged in a storm or fire, or if you’re the victim of theft or vandalism, your policy can help you repair or even replace your property.
• Protection against liability: If a worker, delivery person or guest is injured on your property, it’s possible that you could be found responsible for their injuries and associated medical costs. Homeowners insurance includes liability protection that can help pay those costs and protect you financially. Your homeowners coverage can also help pay for a legal defense if a lawsuit is filed against you following such an incident.
• Coverage for your belongings and upgrades: Homeowners insurance doesn’t just cover the structure of your house; it also covers your personal belongings, including your furniture, clothing and electronics, as well as other structures on your property, such as a fence or garage. If a tree falls and wrecks your patio or a window blows out during a storm and your computer is ruined, insurance can reimburse you for replacing those items.

If you’re comparing coverage options, home insurance policies, home insurance coverages and home insurance discounts can help you understand what may fit your needs. You may also want to learn how to choose a home insurance company and when to review and update your homeowners insurance policy.

Understanding the hidden costs of homeownership helps first-time buyers plan and save – and not just for your mortgage down payment.

Budgeting for these common homeowner costs can help you handle the ongoing costs of owning a house with more confidence. Homeowners insurance provides a critical safeguard for your property and belongings.