Mortgage Payments Are Just the Start. Here’s What Homeownership Really Costs

The cost of owning a home is surging, and it’s not just because of high mortgage rates and increased home prices. Other housing fees and expenses are catching homeowners off guard. 

Many households budget for gradually paying off the amount they borrowed on a home loan (the principal) and monthly interest. Yet they don’t always factor in things like property taxes and insurance until late in the process. “This can derail financial plans, forcing tough decisions like stretching budgets too thin or walking away from a dream home altogether,” said Travis Hodges, managing director at VIU by HUB, a digital insurance platform. 

In recent years, skyrocketing home insurance premiums and rising property taxes have added thousands of dollars to mortgage payments, pushing them beyond affordability. Meanwhile, homeowners also have to budget for home repairs, maintenance and utilities on top of the increased everyday costs of health care, childcare, education and entertainment. 

Even if you can afford the upfront costs of buying a home, it’s important to understand the everyday price of homeownership.

Why is homeownership more expensive these days?

Since 2020, the average cost of owning a home has ballooned by 26%, far exceeding wage growth for the same period. The average homeowner spends upwards of $20,000 to own and maintain a home each year, and that’s on top of regular mortgage payments. 

Property taxes, insurance premiums and maintenance costs are the three main factors making homeownership more expensive today, and they show no sign of reversing course.

Property taxes

Home values have surged in recent years, which means millions of homeowners have seen a staggering increase in their property tax bills. In 2024, the average American household paid about $3,018 in annual property taxes, up 27.4% since 2019. 

How much you pay depends on your local tax rate and your property’s assessed value. Tax rates vary by state and county and are typically reassessed every one to five years or when a property changes hands.

Property tax increases can eventually be offset by rising home equity. Yet this can only occur if you decide to sell your home, refinance your mortgage or tap into that equity with a home equity loan or home equity line of credit. Until then, rising property taxes can be a sudden financial burden cutting into your monthly budget. 

Homeowners insurance

Since early 2020, the average monthly insurance payment has increased 52%, with some households in higher-risk areas facing a 90% increase over the same period, according to Intercontinental Exchange. Rising insurance premiums are partially due to inflation and construction costs, as well as the increasing risks of hurricanes, wildfires, tornadoes and other destructive events. 

The amount you’ll pay depends on various factors, including your property’s location, age and square footage, and the policy you choose.

Annual insurance costs in “low-risk” states like Hawaii or Vermont are around $500 to $800, significantly lower than the national average of $2,258. But in hurricane-prone Florida, the average annual premium is around $5,488, with monthly costs of roughly $457.

Opting to go without insurance coverage can be a devastating burden to homeowners recovering from a major loss. In recent years, a growing number of private insurers have cut coverage in high-risk areas. State Farm, for example, dropped 69% of policies in California’s Pacific Palisades just months before devastating wildfires tore through the area, leaving families with the enormous financial burden of repairing or rebuilding their homes. 

“Without coverage, even a single unforeseen event, whether storm damage, fire or another costly incident, could impact a family’s financial stability,” Hodges said.

Maintenance and repairs

Generally, you can expect to spend around 2% of your home’s value on maintenance and repairs each year. On a $400,000 house, that would add up to $8,000 a year.

However, that number has increased substantially due to years of high inflation driving up the price of materials, appliances and labor. In 2024, the average household spent an average of $12,050, compared to $8,485 in 2017, according to a recent report by Angi, a home services website. 

The same survey also found that 50% of homeowners experienced surprise expenses, adding strain to already tight budgets. Extreme weather events, such as wildfires, floods and tornadoes, are a growing pain point for homeowners. 

For example, the average fire damage restoration cost is $27,175. Depending on the size of your home and the scope of the damage, though, prices can range anywhere from $800 to $180,000. If you live in an area where you’ve lost or are denied insurance coverage, that number will be even higher.

Other costs associated with homeownership

Aside from property taxes and insurance payments, you’ll also need to budget for these costs when buying a home: 

Closing costs: Closing costs are an overlooked set of expenses you’ll need to pay when you buy a home. They are typically paid upfront but can also be rolled into your mortgage balance, with a “no-closing cost mortgage” (if it’s offered by your lender). Depending on your location, closing costs can be expensive, ranging from 1% to 6% of the purchase price. Those costs include a home appraisal, transfer of ownership, real estate taxes on the transfer of ownership, title insurance for the new owner (you), title insurance for the lender and origination fees. 

Private mortgage insurance: If you purchase a home with a down payment of less than 20%, you may have to include private mortgage insurance in your monthly payment. Lenders tend to consider borrowers who make smaller down payments as higher-risk candidates for mortgages, and the PMI requirements protect the lender in case of a default. Borrowers with PMI typically spend between 0.5% and 1.5% of their loan amount on average each year, or between $30 and $70 monthly per $100,000 borrowed. 

Utility bills: Utility costs have risen rapidly due to inflation. Your exact bill will depend on several factors, including the time of year, your monthly usage and the location and size of your house. In 2024, average monthly utilities costs in the US ranged from $500 to $600.

HOA fees: When you buy a house in a community with a homeowners association, you become a member and will need to pay ongoing quarterly or monthly HOA fees to cover the maintenance and upkeep of shared areas, like sidewalks. HOA fees can range between $100 and $1,000 a month, depending on where you live.

Interior and exterior costs: Emergency maintenance or urgent repairs are hard to anticipate, but there are also fees associated with ongoing upgrades and aesthetic upkeep. 

• Paint job
• Roof repairs
• Deck, patio or pool upkeep
• Floor refinishing
• Insulation
• Electrical and plumbing maintenance or repairs
• Mold and/or termite removal
• Heating, ventilation and air conditioning maintenance/installation
• Garden and tree care
• Pest control
• Security system
• Window coverings and lighting 
• Leaf and/or snow removal 

How your loan term affects your monthly mortgage payment

The length of your home loan plays a role in your interest rate and monthly mortgage payment. Shorter-term loans usually have lower interest rates but higher monthly payments because you pay it off in a shorter period. Longer-term loans have the benefit of lower monthly payments but you’ll pay more in interest over time.

Even if you have a fixed-rate loan, your payments can still fluctuate. That’s because lenders typically bundle your homeowners insurance and property taxes, which are variable costs, into the payment. 

How your down payment affects your monthly mortgage payment

A higher down payment means you’ll borrow less money, which will lower your monthly mortgage payment and help you save interest in the long run. A higher down payment also means you’ll get a better interest rate since lenders typically offer the lowest rates to less risky borrowers. If you make a smaller down payment, you’ll likely need to pay a premium for private mortgage insurance to help offset the additional risk your lender assumes.

Tips for buying a home in 2025

Once you’re confident that you want to buy a home, start studying home price trends. Don’t rush out to look at homes or talk to a real estate agent quite yet.

In addition to maximizing your savings and creating a home-buying budget, here are some extra steps to make sure you’re putting yourself in a position for a good deal.

• Get your credit in shape: Check your credit report and think about ways you can work to boost your score over the next six to 12 months. If you carry a lot of debt on your credit cards, focus on paying them down to improve your score.
• Look for down payment assistance: If you’re a low- or moderate-income borrower, you may be able to qualify for help from your state or local housing authority. First-time homebuyers can also explore options that can make the process more affordable.
• Lock your rate: Interest rates move up and down constantly. A lender might offer you a 6.5% rate on a 30-year mortgage today, but that deal can turn into 7% next week. If you see a rate that looks especially attractive, lock it in so it doesn’t slip away.