What’s the true cost of owning a home?

When people plan for homeownership, the mortgage payment is usually the number they focus on. And it makes sense—it’s the biggest line item. But it’s not the only one. Property taxes, homeowners insurance, maintenance, utilities and a handful of other costs can add a lot of money to what you’re actually spending. 

As a homebuyer, it helps to have a clear picture of the true cost of owning a home before you buy. It can put you in a much stronger position to build your monthly budget, your emergency fund and your long-term financial plans.

Upfront costs of buying a home

Before the keys are in your hand, there are several costs you’ll need to cover to get to closing day. These are one-time expenses, but they can be substantial. Here’s what you can expect to spend before signing on the dotted line:

• Down payment. Generally, you’ll pay a portion of your home’s purchase price upfront. That is your down payment. The rest is financed through your mortgage. Many conventional loans require 5%–20% down.^{Footnote [1]} Servicemembers, Veterans and their families may be eligible for options like VA loans that reduce or eliminate down payments.^{Footnote [2]}
• Closing costs. Separate from your down payment, these include the fees and charges due at closing. They’re typically estimated at 2%–5%^{Footnote [3]} of the loan amount and can include fees like lender fees, title insurance, an appraisal, a home inspection and prepaid items like homeowners insurance and property taxes. 
• Moving and setup costs. Once the sale is final, you may have additional expenses as you settle into your new home. Professional movers, truck rentals, utility deposits and immediate purchases—such as appliances, window treatments or hardware—are all common upfront expenses. It’s smart to budget for them ahead of closing. 

Monthly costs of homeownership

Most people associate the cost of owning a home with their mortgage. While this is likely to be your largest monthly homeownership expense, it’s not the only one. Several recurring expenses come with owning a home, and they tend to stay consistent month after month:

Mortgage payment

Your monthly mortgage payment typically includes principal and interest and may also include private mortgage insurance (PMI), depending on your loan and down payment. Property taxes and homeowners insurance may also be included when paid through an escrow account.

• Principal and interest. This is the amount you borrowed and the cost of borrowing it. If you have a fixed-rate mortgage, the principal and interest portion stays the same for the life of the loan. If you have an adjustable-rate mortgage,^{Footnote [4]} your payment may change over time as the interest rate adjusts.
• Private mortgage insurance (PMI). PMI may be included in your monthly payment depending on your loan and down payment. It may be required for a period of time until certain conditions are met, such as reaching a specific level of equity in the home. Requirements and timelines for removing PMI vary by loan type and terms, and in some cases, mortgage insurance may be required for the life of the loan.
• Property taxes. Property taxes are assessed by your local government and are usually billed annually. If you have an escrow account, property taxes may be collected as part of your monthly mortgage payment, and your lender pays those taxes on your behalf when they are due.
• Homeowners insurance. Depending on your policy, homeowners insurance can help protect your home and belongings in the event of damage, theft or certain disasters. Premiums vary based on factors like your home’s age, size and location—and can change over time. If you have an escrow account, premiums may be collected as part of your monthly mortgage payment, and your lender pays them on your behalf when they are due.

Utilities and services

Electricity, gas, water, trash and internet are ongoing costs that come with any home. Unlike an apartment, where some utilities may be included in rent, homeowners are typically responsible for all of them. Factor these recurring monthly expenses into your budget alongside your mortgage. 

Ongoing maintenance and repair costs

Owning a home means staying on top of the upkeep, and that comes with a price tag. From routine maintenance to unexpected repairs and optional updates, it’s not a matter of if you’ll spend money—it’s a matter of how much. Planning for both ongoing upkeep and larger projects can help you stay ahead of these costs.

Routine home maintenance

For routine upkeep—HVAC filter replacements, gutter cleaning, lawn care, etc.— a common rule of thumb is to budget around 1%–2% of your home’s purchase price each year for maintenance, though actual costs can vary based on factors such as the home’s age, condition and location. On a $350,000 home, that’s about $3,500 annually (roughly $290 a month). 

Repairs, replacements and improvements

Big-ticket items and major systems like a roof, water heater or HVAC system don’t last forever. When they need repair or replacement—or when you choose to make updates like kitchen renovations, new flooring or landscaping—costs can range from a few hundred to several thousand dollars, and in some cases may be much higher depending on the project and scope of work.

Long-term costs of owning a home

The monthly costs of homeownership are easy to see. Long-term costs are often an afterthought, but just as real. Thinking through these early can help you understand what you’re committing to over the full life of your loan:

• Interest paid. The interest on a 30-year mortgage adds up over time. For example, on a $300,000 loan at 7% interest, the total amount paid over the life of the loan would be about $718,000. That means paying about $418,000 in interest. This helps illustrate how loan terms and interest rates can affect the overall cost of borrowing and why it may be helpful to compare loan options that fit your needs.
• Selling costs. When the time comes to sell, there are costs on that end, too. Think about real estate agent commissions, closing costs, staging and any necessary repairs before listing. For Servicemembers navigating a PCS move, selling on a shorter timeline can sometimes mean less room to absorb these costs.
• Market risk. Home values may not follow a predictable pattern and can fluctuate over time, rising or decreasing based on market conditions. Market comps can give you a general idea of what your home might sell for, but you won’t know its value until offers are received. If you need to sell during a down market, you may get less than expected.

2 hidden costs homeowners often forget

Even with careful planning, a few expenses tend to catch first-time homebuyers off guard. They’re easy to overlook when you’re focused on the bigger numbers. Factoring these into your budget early can help you get a clearer picture of your total cost of homeownership—especially since some costs vary by home type:

1. Opportunity cost. Money tied up in a down payment and home equity isn’t available for investing, building an emergency fund or paying down other debt. It’s worth thinking about how buying a home fits into your broader financial picture.
2. HOA fees. If your home is part of a homeowner’s association, you’ll pay monthly or annual dues that cover shared amenities and community upkeep. These fees vary widely and can increase over time. HOAs may also charge special assessments for larger improvement projects that benefit the community. 

How home type affects the cost of ownership

Not all homes come with the same cost structure. The type of home you choose—single-family, townhouse or condominium—can significantly impact your total cost of ownership, both upfront and over time.

Here’s how they typically compare:

• Single-family homes. Single-family homes often come with the highest cost of ownership, but also the most control. You’re responsible for all maintenance, repairs, landscaping and exterior upkeep. There are usually no HOA fees, but costs like roof replacement, siding repairs and yard maintenance fall entirely on you. Property taxes may also be higher, depending on lot size and location.
• Townhouses. Townhouses fall somewhere in the middle. You own both the interior and exterior, but homeowners’ associations often handle some shared elements—such as roofing, exterior walls or common areas. HOA fees are common and can offset certain maintenance responsibilities, but you’ll still be responsible for many repairs within your unit. The overall cost of owning a townhouse is often lower than owning a single-family home, but higher than owning a condominium.
• Condominiums (condos). Condos typically have the lowest maintenance burden, which can reduce day-to-day ownership costs. HOA fees are usually higher, but they often cover exterior maintenance, landscaping, shared amenities and sometimes even utilities. However, these fees can increase over time, and special assessments may be required for major building repairs. While upfront and maintenance costs may be lower, monthly fees are a key factor in the total cost of ownership.

No matter which type of home you choose, it’s important to look beyond the purchase price and understand how responsibilities, fees and long-term upkeep will shape your overall cost of ownership. 

How to calculate your true cost of homeownership

Adding up the full cost of owning a home can give you a much more accurate picture of what you’re taking on beyond a mortgage payment. Here’s a simple example of how these costs can be combined into one framework you can use when evaluating a home:

Purchase costs + monthly expenses + maintenance + long-term costs = True cost of homeownership

Step 1: Add up your purchase costs

Add up your down payment, closing costs and moving and setup expenses. The total is your starting investment before you make a mortgage payment.

Step 2: Calculate your monthly expenses

Add up the recurring costs you’ll pay each month: mortgage payment, which may cover principal, interest, property taxes, homeowners insurance and, if applicable, mortgage insurance, along with other expenses such as energy and utility costs and any HOA dues. Multiply that total by 12 to estimate your annual amount.

Step 3: Estimate your maintenance costs

Plan for maintenance costs of around 1%–2% of the home’s purchase price per year, though actual costs can vary based on the home’s age, condition and location. On a $350,000 home, that’s $3,500–$7,000 annually.

Step 4: Factor in long-term costs

Use a mortgage calculator to find the total interest you’ll pay over the life of your loan. Then add an estimate for selling costs—typically 8%–10% of the home’s sale price.

Step 5: Add it all together

Combine purchase costs, total monthly expenses, annual maintenance and long-term costs to get a full picture of what the home will cost you over time. For an estimated annual cost, divide that number by the term of your loan (for example, a common 30-year term). Choosing a shorter loan term can reduce the total interest you pay over time, but it may also result in higher monthly payments.

4 tips to reduce homeownership costs

There are practical ways to manage what you spend on your home over time. Together, they can make a meaningful difference in how much of your monthly budget goes to home-related expenses:

1. Shop around for homeowners insurance. Insurance premiums vary from one provider to the next. Comparing rates and revisiting them periodically can help you find coverage at a better price. Bundling your home and auto insurance with the same provider is another way many people lower their premiums.
2. Stay ahead of maintenance. Small problems can become expensive ones when they’re left unaddressed. Keeping up with routine maintenance helps protect the condition of your home—and reduces the likelihood of a major repair catching you off guard.
3. Refinance when rates drop. If interest rates fall after you close on your home, refinancing your mortgage could lower your monthly payment. It can also reduce the total interest you pay over the life of the loan. Just be mindful that refinancing also comes with costs.
4. Avoid overbuying. The bigger the home, the more expensive your costs tend to be: higher property taxes, bigger utility bills, more maintenance and steeper insurance premiums. Choosing a home that fits your needs can help keep costs manageable.

Navy Federal Credit Union can help with the home-buying process

Dialing in the true cost of owning a home can put you in a stronger position to buy with confidence and plan for what comes after. The numbers look different for everyone, but the preparation is the same: Know what you’re taking on, budget for the full picture and give yourself room to handle the unexpected.

Navy Federal is here to support you through every part of the process. Whether you’re still weighing your options or ready to take the next step, explore our home-buying resources or learn about mortgage options to see how we can help you move forward.