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Did you know the average annual cost of owning and maintaining a single-family home in the U.S. is more than $21,000 a year? And that doesn’t even include your mortgage payment.
A new Bankrate study did the math, highlighting exactly why some first-time home buyers end up regretting their decision once all the hidden fees are revealed.
The study found that many new homeowners don’t factor in these expenses before making an offer, leaving many unable to keep up with expenses over time — particularly in high-cost-of-living areas like the East and West Coast.
While this doesn’t mean you should permanently forgo home ownership, it does highlight the importance of being aware of the real expense of owning in comparison to renting.
Here are some of the biggest hidden costs you should factor into your budget before accepting the keys to a new home.
The study notes that home insurance prices increased by 24% between 2021 and 2024. They attribute this steep increase to both a rise in property values and the growing frequency of extreme weather events due to climate change, like the fires in Los Angeles and Hurricane Milton in Florida, which inevitably lead to insurers raising their prices.
Coming in at an average of $2,267 a year, this is one cost you can likely reduce by contacting a variety of insurance providers and asking for quotes. Remember, sometimes they raise the price just because they want to — but you can always take that as a sign to find a new provider.
If you’re looking for a quick way to find the most affordable home insurance options, try OfficialHomeInsurance.com.
Just answer a few simple questions, and you’ll be provided with a variety of insurance quotes. Users report saving an average of $482 a year after making the switch.
Keep in mind that you don’t have to wait until your policy is up for renewal to make a change. Just watch out for any early cancellation fees, and factor those into your calculations.
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If you’ve spent your renting years enjoying the cost of utilities being included in your rent, you may feel shocked at just how much more expensive life feels when you receive bills for gas, hydro, water and electricity every month.
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The study found that American homeowners pay an average of $4,494 every year in utility bills alone. If you include cable and internet (which some rentals also provide) that number goes up by another $1,515.
While there isn’t much you can do to reduce the price charged for utilities, many utility providers offer discount pricing during non-peak hours. If this is available to you, set reminders to do utility-intensive tasks like cooking, dishwashing and laundry during those hours. Typically, these off-peak hours are during the evening, weekends or holidays.
You can also call cable and internet providers to ask for the best deal currently available.
In many cases, the introductory price they offered during sign up quietly turns into a much higher fee after a year, but if you call them up again and ask to cut services, they will usually offer the promo rate again. Make an appointment in your calendar to do this yearly to avoid these sneaky increases.
If they refuse, there are many other providers who will be eager to give you a better offer. As always, shopping around can net you some good savings.
While the previous invisible expenses are notable, the most significant expenses homeowners experience are maintenance and repairs.
While you likely assumed there would inevitably be some repairs needed down the line, these costs usually end up occurring faster and more frequently than many anticipate.
Bankrate’s study found the average homeowner spends $8,808 on maintenance every year.
And if your home was built before 1980, this number could be even higher, as significant upgrades will be necessary. The study noted that in 2023, homeowners with pre-1980 homes spent 76% more on maintenance than those with newer homes.
If you’re new to home ownership, you might be feeling this pinch already, but the last thing you should do is panic. Get to work on building out your emergency fund as soon as you can. Often, this involves parking your cash in a high interest savings account so you have the liquidity to quickly respond to repairs.
All these added costs make it clear: Despite all the hubbub around building equity and fearmongering around renting, owning the home you live in isn’t always the better financial option.
In fact, in the most expensive cities, when you break down the math between renting and investing the savings for retirement, or owning and being house poor — it is often the renter who comes out ahead in the future. Finance experts like Ramit Sethi regularly point out that prevailing wisdom around home ownership being the key to wealth building is a lie.
That said, you may not want the hassle or extra expenses of home ownership, but that doesn’t mean you should completely miss out on the gains that come from investing in property.
There are simple ways to enjoy the financial benefits of property ownership without the many downsides.
Platforms like Arrived offer access to shares of SEC-qualified investments in rental homes and vacation rentals, vetted for their appreciation and income potential.
Backed by world-class investors like Jeff Bezos, Arrived makes it simple to add real estate to your portfolio without buying a home.
With as little as a $100 initial investment, Arrived makes property investing for everyone — even long-term renters.
And if you’re curious about commercial property, accredited investors can try First National Realty Partners (FNRP).
With a minimum investment of $50,000, you can own a share of properties leased by national brands like Whole Foods, Kroger and Walmart without lifting a finger. Thanks to triple net leases, accredited investors are able to invest in these properties without worrying about tenant costs cutting into potential returns.
Just answer a few questions to start browsing their available properties.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.