True Cost of Home Ownership

many items go into total cost of home ownershipBuyers focus on the mortgage but it doesn’t tell you the true cost of home ownership. With your first home, you compare your mortgage payment to the rent you’ve been paying but wait, what expenses were included in your rent? Your landlord pays the mortgage, taxes and insurance. Most states require water to be included in your rent and what do you do when the window won’t shut? You call the landlord and he/she handles the repairs.

Most homeowners don’t know how much they’re spending on their homes. We’ve been taught to focus on the initial price of a car or refrigerator. We rarely consider the annual operating costs even with stickers telling us how much it will cost. When I bought my Toyota Rav4 in 2007, I calculated how much more a 6-cylinder would cost versus a 4-cylinder car and ordered the 4-cylinder. The dealer tried to discourage me, telling me it would hurt resale. Amazingly, 6 months later I could have sold my car over purchase price because of the higher mileage when gas prices went over $4/gallon.

Cost of Home Ownership: Financial Costs

Your financial obligations are the biggest part of your cost of home ownership. Sadly, home buyers don’t estimate the total cost of home ownership when deciding how much house they can afford.

  • Mortgage principal and interest – varies based on how much you paid for your home (or refinanced) and the interest rate. Most homeowners today don’t know how incredible 4 or even 5% interest rates are compared to rates that have escalated to more than 10% (18% in 1981) over the last 30 years (details at
  • Property taxes – you live where you do because you grew up there, or got a job and moved there. While most people don’t look at state property taxes until they’re researching where to live in retirement, you should research local property taxes which can vary significantly.
  • Insurance – the average (across the US; for more details visit the Insurance Information Institute website) homeowners insurance premium was $978 in 2011.

Cost of Home Ownership: Operating Costs

When you go from renting an apartment to home ownership, suddenly you’re paying all the utilities where the landlord might have included some of them in your rent. You likely have you more square feet and that means more space (cubic feet) to heat and cool. This map from One Block Off the Grid provides a nice visual comparing gas and electric costs across the US.

utility costs are a cost of home ownership

  • Electricity – costs vary across the US from a low of $75/mo in New Mexico to more than $200/mo in Hawaii. You can check your state’s average costs here …
  • Heat – is a tough statistic because there are so many different ways to heat your house, so here’s a map showing the average spending on gas and electricity (different than electric numbers above) across the US, although it appears to be missing the cost of heating oil.
  • Water – varies from nothing if you have a well to more than $200/mo in larger cities, with the average water bill in the US at $51/mo according to
  • Phones – is a funny item these days as most people have done away with landlines, and for those that still have them, they run between $20 and 30/mo. Even if you try to save money by using Voice Over Internet (VoIP), you’re going to pay about $30 after an introductory rate for 6 to 12 months.
  • Cable – are much too expensive at $78/mo, and according to, The Cable Bills Too High; Here’s Why, it’s because our government has given up regulating this industry, allowing it to grow unchecked.
  • Internet – costs average between $50 and 60/mo, depending on which Internet service provider you use. 
  • Maintenance services – like lawn care and pool maintenance can add up quickly, so it’s a personal decision of whether you can afford the added costs versus do-it-yourself … so for this example, let’s assume an average of $100/mo.

Home Ownership Includes Improvements & Repairs

cost of home ownership includes small & major repairsSo it’s not surprising that most homeowners don’t budget for home improvements and repairs. Given the costs outlined above for the average US home with a $200,000 mortgage – principal and interest of $1,074 (5% interest rate), taxes at 1.25% or $260/mo, insurance at $82/mo plus operating costs of $557/mo = total cost of ownership at $1973/mo.

But wait, what about home maintenance and repairs? And what happens when your roof leaks and the estimate for a new roof is almost $8,000? To avoid the added costs of repairs from a leaky roof, or making the wrong decision under stress you should budget for ongoing maintenance and repairs.

You might think you’re saving money by ignoring home maintenance but it will cost you more money, and a lot more stress. By replacing your roof before a major leak, you’ll avoid repair costs (attic insulation, soggy drywall and more) and you’ll have time to find a reputable roofing company rather than going with the cheapest roof or the only roofer to give you an estimate the day after the leak.

You should budget 1 to 2% or $200 to 400/mo ($2,500 to 5,000/yr for a home worth $250,000) for ongoing maintenance and plan for replacing home features like your roof, hot water heater and more than we can explain here but we’ve got you covered.

Planning and Budgeting for Exterior Home Updates

Budgeting to Replace/Upgrade Interior Home Components 

… so how much should you be budgeting for home improvements and repairs? 


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  • Bo Smith

    Tina, great article. I specialize in Energy Efficient Mortgages and Renovation Lending and find that the choices that clients make and even woman are more cosmetic in nature than sustainable in nature only for some to fall victim to higher costs of mechanical repairs or homeownership months later.

    • tinagleisner

      Thanks Bo, as ever since I started learning how to maintain & updates homes running my handyman business, I’ve been writing to help homeowners gain more knowledge & make smarter decisions.

    • tinagleisner

      Bo, Are you able to give me an article on Energy Efficient Mortgages, that I can publish here, giving you credit of course. I’ve been to a few workshops on the topic in NH and it’s been pretty discouraging, as there aren’t enough comps so banks are reluctant to fund these houses.

      • Bo Smith

        Tina, i have a YOUTUBE Channel under BoKnowsMortgages about EEMs and I have a variety of PDFs to provide you. Inbox me at

        • Tina Gleisner

          Bo, I’ve tried sending you email but it keeps bouncing. Can you send PDFs to Thanks

  • Jeff Onofrio

    Hi Tina-

    I, like Bo, also am a renovation lender and I was hoping that I may have your permission to repost your blog on my site. The reason I, and I would assume Bo, like this article is because it brings to light why someone who is purchasing a home might be best served by using a renovation mortgage to include some or all of these types of maintience, repairs or upgrades into there home loan so they do not run into these major ticket expenses once they are in the home and they do not have the cash to pay for the repairs. As you mentioned home buyers are not thinking this way and I try to educate buyers of these issues everyday. Let me know and of course I will give you credit and a link. Have a happy New Year!

    Jeff Onofrio
    Director of Renovation Lending at AnnieMac Home Mortgage

    • tinagleisner

      Jeff, Sent you a more detailed email including permission to re-post the article & thanks for asking.

      • Jeff Onofrio

        Thank you Tina. Happy New Year and I will be back in touch soon. I look forward to working with you in 2014!

  • tinagleisner

    Just looking at Trulia’s rent vs buy calculator,, and they did include 1% of home value for renovations. They also suggest price appreciation of 2-3% is appropriate as long as you understand that the housing market is volatile.