Hidden Home Ownership Costs You Should Know

Summary: Homeownership comes with more than just a mortgage—there are hidden costs many buyers overlook. This article breaks down these expenses so you can plan wisely and avoid financial surprises.

Thinking about making the jump from renter to homeowner? It’s an exciting milestone, but while you’re focused on finding the perfect house and saving for that down payment, don’t forget to consider the hidden costs of homeownership. These often-overlooked expenses can catch you off guard and affect your budget.

Once you move in, you’ll quickly realize that homeownership comes with financial responsibilities beyond your mortgage. We’ll guide you through the key steps of budgeting for unexpected homeownership expenses, ensuring you’re prepared for your new financial obligations.

5 hidden homeownership costs

From unexpected repairs to regular maintenance and rising property taxes, hidden homeownership costs can add up. Here are five you should know:

1. Mortgage interest

Before you start house hunting, it’s crucial to get your credit in shape because it plays a big role in determining the interest rate on your mortgage. Why does this matter? Well, a portion of your monthly mortgage payment goes toward paying interest, and your interest rate is determined, in part, by your credit score.

Start by checking your credit reports from the credit bureaus, such as Equifax and Experian.¹ If you find any errors, correct them, as they could negatively affect your credit score. Also, make sure any overdue accounts are paid off to boost your score.

Next, check your FICO score—it’s the key factor lenders use to determine your creditworthiness. A higher score means a lower interest rate and substantial savings. Even minor improvements can significantly affect your loan terms. For instance, a 695 FICO score might get you a 30-year, $300,000 mortgage at 2.76% interest. However, raising your score to 700 could lower that rate to 2.58%, saving over $10,000 over the loan’s lifetime.

2. Property taxes

Property taxes are one of the biggest hidden costs of homeownership, and they can vary dramatically depending on where you live. These taxes are based on the local tax rate and the assessed value of your home, and they’re often paid annually or bundled into your monthly mortgage payments.

For example, New Jersey has one of the highest effective property tax rates in the country—around 2.23%—while Hawaii’s is the lowest, at roughly 0.32%.² But don’t be fooled by low rates alone. Hawaii’s high home prices mean you could still end up with a hefty annual bill.

Many areas limit yearly property tax increases. Also, you can appeal a high assessment if your home’s value seems inflated compared to similar properties, potentially lowering your taxes.

3. Utilities

One of the most surprising hidden costs of homeownership is the jump in monthly utility bills. While renters often pay a flat fee or have some utilities covered, homeowners handle everything—from water and trash to electricity, gas, internet, and sometimes even sewage fees.

According to Move.org, the average homeowner spends nearly $380 per month on utilities. That’s a big jump—and a crucial reason you need to budget for homeownership costs beyond just your mortgage.³

The good news? There are practical ways to cut costs without sacrificing comfort. Try these:

• Wash clothes in warm or cold water instead of hot.
• Lower your water heater’s temperature by a few degrees.
• Replace air filters regularly to help your HVAC system run efficiently.
• Install a programmable thermostat to reduce heating and cooling when you’re asleep or away.
• Upgrade to energy-efficient appliances for long-term savings on electricity and gas.

4. Maintenance and repairs

Homes require continuous upkeep, and the older the house, the more maintenance is required. Some maintenance is routine and anticipated, such as yearly gutter cleaning, seasonal lawn care or snow removal, an annual heating and air conditioning inspection and service, or a periodic fresh coat of paint for interior walls. But other maintenance is unexpected–and often expensive–such as roof damage from a tree branch or a water heater that springs a leak.

To handle routine and unexpected home ownership expenses, create a home maintenance fund that’s separate from your other savings. A popular guideline is to set aside 1% of your home value each year that you can tap as needed to make repairs or replace appliances. On a $300,000 home, for example, you would save $3,000 annually.

5. Homeowners’ insurance

Premiums are higher in areas that are prone to natural disasters or in heavily populated locales that tend to have steeper construction costs. And the amount you pay may also be tied to the size and age of your home, as well as whether it’s brick or more flammable wood.

Each insurer has its own criteria for setting rates, so it’s wise to shop around for the best price. As you compare, consider these ways to reduce premiums:

• Choose a higher deductible and avoid making small claims. The standard recommendation is a $500 deductible, but you can save as much as 25% off your premiums by doubling the deductible to $1,000, according to the Insurance Information Institute (III). ⁴
• Add safety features, such as smoke detectors, deadbolt locks on doors and an alarm system.
• “Bundle” your insurance, which is buying more than one type of policy from the same insurer. Buying auto and home policies from the same company, for example, can trim five to 15% off the cost of insurance, according to the III.
• Maintain good credit. Most states allow insurers to use credit scores as a factor in setting premiums.

Plan ahead for the hidden costs of homeownership

Buying a home is an enormous step, but it’s more than just being able to afford a mortgage. Unexpected costs like utilities, property taxes, and repairs can quickly mount up if you’re not prepared. So, budget carefully from the start—for the obvious expenses and the hidden ones that often surprise new homeowners.

Start by creating a monthly budget that includes fixed costs (like your mortgage and property taxes) and a cushion for hidden costs of homeownership. And remember the expert’s advice to save 1% to 3% of your home’s value annually for ongoing maintenance and emergency repairs.

At Mutual of Omaha, we’re here to help you navigate those financial unknowns. Whether it’s exploring disability income insurance or finding the right life insurance plan, our financial professionals can guide you along whatever journey you chose. If you decide homeownership is the best option for you, our mortgage experts are available to walk you through the process, to help make it smooth and stress-free.

Frequently Asked Questions

Q1: How do homeowners’ association (HOA) fees impact homeownership costs?

If your home is part of an HOA, you may be required to pay monthly or annual dues. These fees cover things like community maintenance, landscaping, and amenities—but they can add hundreds of dollars per month to your budget for homeownership costs.⁵

Q2: Are closing costs part of the hidden costs of buying a home?

Yes. Closing costs—including loan origination fees, title insurance, home inspection fees, and attorney fees—can add 2% to 5% of the home’s purchase price. Many first-time buyers overlook these hidden costs of buying a home, so it’s crucial to plan for them early.

Q4: Can property insurance premiums increase over time?

Absolutely. Homeowners’ insurance costs can rise because of inflation, natural disasters in your area, or upgrades that increase your home’s value. An annual policy review will help to ensure your coverage matches your needs and helps control rising insurance costs.

Sources:

1. Experian, How to get your annual credit report, 2025
2. Business Insider, Property tax rates by state, November 2024
3. org, Utility bills 101: Average costs and tips to save, November 2024
4. Insurance Information Institute: 12 ways to lower your homeowners insurance costs
5. Bankrate, What are HOA fees and what do they cover? September 2023

Disclosures

Mutual of Omaha Mortgage, Inc., NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Subject to Credit Approval. For licensing information, go to: www.nmlsconsumeraccess.org

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