For many first-time home buyers, purchasing a home is a major financial milestone. But while you may have budgeted for your mortgage, the true costs of homeownership go far beyond your monthly loan payment.
In this guide, we cover the hidden and often unexpected costs that come with owning a home—so you can avoid surprises and budget smarter.
1. Property Taxes: The Cost That Keeps Rising
One of the biggest recurring costs of homeownership is property tax. These taxes are based on your home’s assessed value and can increase annually, especially if property values in your area go up. Don’t overlook this when calculating your long-term budget.
Tip for first-time home buyers: Use your local assessor’s website to estimate yearly property taxes before making an offer.
2. Homeowners Insurance: Required and Often Underestimated
Most lenders require homeowners insurance, but even if it’s bundled with your mortgage, the cost can vary depending on:
- Your home’s value and age
- Risk factors like flood zones or fire-prone areas
- Additional coverage needs (like earthquake or flood insurance)
Don’t assume your policy covers everything—review exclusions carefully. Standard insurance policies often don’t cover things like animal or insect damage, flooding and mold.
3. Maintenance and Repairs: Plan for the Unexpected
A key cost of homeownership that catches many first-time buyers off guard is ongoing maintenance. Experts recommend budgeting 1–4% of your home’s value each year for upkeep. That means for a $500,000 home, you should expect to spend $5,000 to $20,000 each year.
Common expenses include:
- Roof and HVAC repairs
- Plumbing issues
- Lawn care and landscaping
- Appliance replacements
Ignoring maintenance can lead to much higher repair bills down the line. Create a home repair fund from the beginning to avoid financial stress when something breaks.
4. Utilities and Monthly Services: Bigger Home, Bigger Bills
Owning a home usually means more space—and more expenses. Common utility and service costs include:
- Electricity and gas
- Water, sewer, and garbage collection
- Internet, cable, and home security systems
These can vary widely by location and season, so first-time home buyers should request previous utility bills when considering a property.
5. HOA Fees: Shared Spaces, Shared Costs
If your home is part of a community with a homeowners association (HOA), you’ll likely pay monthly or quarterly dues. These fees cover amenities, community maintenance, and insurance for shared spaces. Fees can range from $50 to $500+ per month.
Some HOAs also issue special assessments for big-ticket repairs or upgrades, adding more to the overall cost of homeownership.
Non-compliance fines can cost you too. Always ask for HOA rules and fee history before closing.
6. Home Upgrades and Renovations: Nice to Have, Costly to Do
Many first-time home buyers are excited to personalize their space. But upgrades like new flooring, kitchen remodels, or smart home systems can cost thousands.
Not all improvements increase your home’s resale value. Be realistic about return on investment (ROI), especially if you plan to sell within a few years. Budget carefully and prioritize necessary repairs over cosmetic changes.
7. Mortgage-Related Fees: More Than Just the Loan
Even after closing, your mortgage might come with additional expenses:
- PMI (Private Mortgage Insurance): Required if your down payment is under 20%
- Loan servicing fees or escrow shortages
- Refinancing or early payment penalties
Ask your lender to explain every fee upfront to avoid surprises later.
8. Tax Implications: Deductions and Surprises
Homeowners may qualify for tax deductions such as:
- Mortgage interest
- Property taxes
- Some home office expenses (If you’re self-employed)
However, these benefits only apply if you itemize deductions, which many people don’t under current tax laws because the standard deduction is so high.
Also, when selling your home, you may face capital gains taxes if your profit exceeds IRS exclusion limits.
ezTaxReturn makes it easy to claim homeowner tax breaks and maximize your refund.
The Bottom Line: First-Time Home Buyers Need a Complete Budget
Understanding the true costs of homeownership is essential for financial success. As a first-time home buyer, your budget needs to go beyond just covering the mortgage.
Here’s a quick checklist:
- Factor in annual maintenance and repairs
- Estimate your total monthly costs (utilities, HOA fees, insurance)
- Plan for taxes and future home improvements
- Know your tax benefits and how to claim them
Whether you’re buying your first home or already settling in, don’t leave money on the table at tax time. ezTaxReturn helps homeowners get the deductions they deserve—fast, easy, and 100% online. File your taxes now with ezTaxReturn.
FREE DOWNLOAD: Homeowner Budget Planner
Stay on top of every homeowner expense. Get your free printable budget planner to track the real costs of homeownership.
Frequently Asked Questions: Costs of Homeownership
1. What are the biggest hidden costs of homeownership?
The biggest hidden costs include property taxes, homeowners insurance, ongoing maintenance, utilities, and unexpected repairs. Many first-time home buyers also overlook HOA fees, mortgage-related expenses like PMI, and the costs of future upgrades.
2. How much should first-time home buyers budget for home maintenance?
Experts recommend setting aside 1% to 4% of your home’s value annually for maintenance and repairs. For example, if your home is worth $300,000, you should budget $3,000 to $12,000 per year.
3. Are property taxes included in my mortgage payment?
In many cases, yes—lenders bundle property taxes and homeowners insurance into your monthly mortgage payment through an escrow account. However, tax rates can increase over time, so it’s important to review your annual escrow statements.
4. Do all homeowners have to pay HOA fees?
No. HOA (Homeowners Association) fees only apply if your property is located in a managed community. If so, these fees are mandatory and may cover amenities, maintenance, and community services.
5. What tax benefits do first-time home buyers get?
First-time home buyers may qualify for deductions on mortgage interest and property taxes if they itemize. Some states also offer first-time home buyer credits or assistance. Use ezTaxReturn to see which tax breaks apply to your situation.
The articles and content published on this blog are provided for informational purposes only. The information presented is not intended to be, and should not be taken as, legal, financial, or professional advice. Readers are advised to seek appropriate professional guidance and conduct their own due diligence before making any decisions based on the information provided.
