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Hidden Costs of Homeownership

By Benjamin Temin 

In recent months, the JCS Financial Wellness blogs have focused on an assortment of important financial topics that people should consider, such as emergency funds and use of credit cards. Another topic that many may find useful is housing. There is the issue of supply and demand, mortgage interest rates, raw material shortages, increased rental costs, and the list goes on in our society and economy.  

I would like to focus on one aspect that often gets overlooked, especially for first-time homebuyers, which is knowing the actual cost of homeownership over time. Described as “phantom costs” by personal finance expert Ramit Sethi, these hidden expenses may not be factored in during the decision-making process as well as cost comparison.  

When budgeting, use the 1% rule. Experts recommend setting aside 1% of the total cost of the home for annual maintenance. For example, if a house costs $300,000, it’s a good idea to plan for $3,000 in maintenance costs per year.  

This can fluctuate based on several factors that include: 

  • Age and condition of the property 
  • Cost and availability of repair services in your area 
  • Environmental conditions like temperature, humidity, and weather 

There are also major repairs that can also occur. For example, let’s imagine that you buy a home, and within 8-10 years the roof needs to be repaired at a cost of $10,000. That amounts to approximately $100 per month since the date of purchase! 

There are other costs such as landscaping, pest control, HOA fees (which can increase over time), and economic factors that may decrease the property value, natural disasters and other emergencies. There are non-financial circumstances such as the stress of managing and coping with home-related expenses when they’re not planned and there aren’t enough funds available.  

There is no doubt there are many advantages, both financial and otherwise, to homeownership. This blog is not meant to discourage, however our focus on the goal of home ownership may cause us to overlook future expenses. When considering the affordability of purchasing a home versus renting, or comparing several housing options, think beyond the mortgage payment and property taxes. It’s important to bring these hidden fees to light so we can make better decisions for our long-term financial wellness.

 

Benjamin Temin is a Coordinator for Economic Sufficiency at Jewish Community Services. 

Jewish Community Services (JCS) is dedicated to providing programs and services that help people of all ages and backgrounds achieve their goals and enhance their wellbeing.  

To learn more, visit jcsbalt.org or 410-466-9200.

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