The Other Costs of Home Ownership
Despite the traumatic breaking of the housing bubble, I think it is fair to say that the desire for home ownership by non-owners remains strong. The lust to be a homeowner almost seems programmed into our DNA, even though a home “owner” these days is in reality more of a long term borrower. For example, 55.4% of Americans in the 55-64 age bracket have a mortgage compared to the national ratio of 48.7%. (Source) Thirty years of debt is a long time.
However, the lustful non-owners tend to focus so much on mortgage interest rates and down-payments, they tend to overlook the other costs of home ownership. These are time and financial commitments that many do not appreciate until they experience them. I should know. Mrs. ToughMoneyLove and I have “owned” homes for all but one year of our 31 year marriage. (We rented during my first year of law school.) For the past 6 years, we have owned two homes, occupying both part-time. I suppose that gives us the equivalent of 36 years of home ownership cost data on which to base what I am writing here.
So let’s list some of the bigger ticket items that those of you who rent and have not yet experienced home ownership may not have thought all the way through.
1. Taxes and Insurance. These are the usual suspects, only because most mortgage payments include them. But unlike a fixed rate mortgage, taxes and insurance are almost certain to increase over time. Paying off a mortgage isn’t so much fun when you are still left paying $1000/month + in T&I.
2. Utilities. Another usual suspect but often underestimated. You can make it worse with such things as sprinkler systems. Most of my neighbors have them. Not me. Who wants to encourage the grass to grow faster? With cap and trade on the horizon, the energy expense category is sure to increase.
3. Homeowner Association Dues. These can be relatively low (ours is $125/quarter and that includes twice weekly trash pickup) but can be pricey. Also watch out for special assessments for capital repairs and improvements to common areas.
4. Lawn Care. Hate it. Hate it. Hate it. You invest your time or money or both – your choice. Don’t forget the cost of lawn mowers, tools, etc. It never ends.
5. Exterior maintenance. New roof. Painting the siding or trim. Driveway sealing. Deck sealing and repair. New windows. I’ve had to pay for all of this. Some of these you can do yourself. Others are big ticket items that you need to save for, just like saving to buy a car. Oh, and don’t forget those man-toys that go along with these maintenance items: power washers, compressors, super deluxe ladders, assorted power tools. Unfortunately, credit cards and Home Depot were perfectly designed to encourage us to purchase these budget busters.
6. Interior maintenance. This list is endless. Appliances, HVAC, new carpet, plumbing leaks, painting, more leaks, more painting, new water heater, more HVAC, and so on. If you are handy, you trade your time for money.
7. Keep up with the Neighbor Expenses. These are optional but you won’t resist all of them: backyard pool (please don’t), hot tub (save your money), patio furniture, gas grill (OK – you gotta have this one), home theaters. Everything your neighbor gets will tempt you.
8. Furniture and Space Fillers. Renters almost always have smaller spaces to furnish. Furniture is expensive. There are quite a few McMansions in our community with unfurnished rooms, just for that reason. Similarly, homeowners have a magical ability to slowly but surely fill all available storage space with “stuff” they buy and then don’t use. Lot’s of folks can’t actually fit two cars into a two car garage.
9. Your Time. There is no question that home ownership requires a time commitment way above and beyond that of a renter. A lot of that is pride of ownership and can be fun and rewarding. Some of it is pure drudgery. That’s a real cost in life experience.
I’m exhausted just thinking about all that we’ve done over the years, including everything I’ve listed here.
I’m sure I’ve missed some cost items. Help me out so that non-homeowner readers will have their eyes opened all the way.