The Real Cost of Owning a Home — Eric TurnerEric TurnerAboutPostsCategoriesThe Real Cost of Owning a HomeMay 24, 2026financesreal-estateYou've probably heard someone say something to the effect of "renting is just throwing your money away". Don't believe
it. It's a glib statement that simply isn't true. There are so many hidden costs to home ownership that most people who
have never owned a home don't know about. If you want to make an informed decision about whether to buy a home or keep
renting, then you need to understand these costs. I'll break them down for you in this post, showing my actual costs.
Expenses
Mortgage Loan Fees
Getting a loan is not cheap. When I bought my home, the total settlement costs were about 3% of the value of the home.
Here is the breakdown of my loan costs when I bought my house. Keep in mind this was way back in early 2011, so current
costs are undoubtedly higher:

FEETOTAL

Origination charge$594.00
Credit report$14.84
Appraisal$395.00
Tax service fee$70.00
Flood life of loan fee$19.00
Abstract or title search$150.00
Title exam/attorney opinion$550.00
Notary$35.00
Title insurance (lender coverage)$840.00
Title insurance (owner coverage)$1,785.00
Recording fee - deed$40.00
Recording fee - mortgage$40.00
State tax/stamp - deed$3,612.50
Recording fee - assignment$40.00
Survey$225.00
Pest inspection$55.00
Interest (1 day)$42.58
Escrow (tax and insurance)$3,745.00
1st year insurance premium$900.00
Aggregate adjustment($375.00)

That's $12,777.92 to get the loan.
Mortgage Payment
When you get a loan to buy a house, you pay for two main things each month: principal and interest. The principal
reduces how much you owe, and the interest is what the bank earns for lending you the money. I don't consider principal
an expense, since paying it doesn't change your net worth. Sure, your checking account has less money in it, but you
also have less debt.
Interest, on the other hand, is an expense. It lowers your net worth. About 80% of your first mortgage payment is
interest. Not much different than renting at first. Over time, you'll pay less interest and more principal, but for the
first few years you'll be surprised how little you actually reduce the amount you owe.
You may also have to pay Private Mortgage Insurance (PMI) if you don't have a large enough down payment. When I bought
my house, you needed to put down 20% of the home price to avoid paying PMI.
Usually your other expenses such as taxes and insurance are included in your monthly payment, and paid into escrow each
month. Insurance and taxes are automatically paid out of escrow for you once or twice a year.
My first mortgage payment in January 2011 was:

ITEMAMOUNT

Principal$482.64
Interest$1,299.81
Tax$389.67
Insurance$44.75
PMI$113.05

That's $2,329.92 per month.
Less than 21% of my monthly payment was going toward paying off the loan! $1,847.28 of that was pure expense; a
reduction of my net worth. At the time I bought my house, I was paying about the same amount for a very nice one-bedroom
apartment in downtown Baltimore with a view of the downtown skyline, the baseball stadium, and the harbor. It makes that
rent-vs-buy decision a lot less clear-cut.
I no longer pay PMI. You can request that they remove it when you think your equity in the home is 20% or more, or they
will eventually remove it. The bank may charge you to have your house assessed.
I pay $113.05 less per month without PMI, but tax and insurance always goes up. I currently pay $515.50 per month for
tax, $111.17 per month for insurance, and $31.36 per month of escrow shortage (your escrow amount to pay taxes and
insurance is estimated each year, and if they don't estimate correctly then they add an overage/shortage charge each
month to correct it).
My current total mortgage payment is $2,440.48.
Insurance
Insurance is required by the lender, but even if your house is paid off you should have insurance. The cost of insurance
increases every year.
You may at some point be required to make improvements (e.g. replace your roof) to keep your insurance.
I currently pay $111.17 per month for homeowner's insurance.
Taxes
If you're buying a house that was just built, be aware that the past property taxes on record won't reflect how much you
will actually pay for taxes. Your property value will be reassessed, and the new assessed value (which taxes are based
on) will include the new structure.
Taxes go up every year too. Try to find out if there's a program to cap property assessment increases and/or tax rate
increases. In my area it's called the Homestead Tax Credit.
I currently pay $515.50 per month for property taxes.
Maintenance & Repairs
General wisdom is to plan to save at least 1% of the value of your home each year to cover current and future
maintenance and repairs. Older homes may have deferred maintenance or repairs that needs to be addressed, or have more
undiscovered or upcoming maintenance or repairs to expect. In that case you should plan to save at a higher rate.
My 1983 home had been used as a rental for years, so much of the maintenance had been neglected. Here are some examples
of the maintenance and repairs I've had done on my house:

Replaced leaking skylights: $6,566
New roof: $9,390
New windows: $10,530
New siding: $21,046
Cut down trees that were too close to the house: $2,800
Replaced polybutylene water pipes: $5,050
New gutters: $2,714
Replaced drain pump in the dishwasher: $95
Replaced leaking faucet: $185
Replaced failing HVAC control board: $65
Yard maintenance (e.g. mulch, weed control, mowing, etc): probably around $500/year
Fixed handrail for the exterior basement stairwell: $85

You can save a lot of money in maintenance and repairs by doing your own work whenever possible. I replaced the drain
pump in my dishwasher, replaced a leaking kitchen faucet, replaced the control board on my HVAC system, do all my own
yard work, etc.
Improvements
You may want to put up a fence, a garden shed, pave a gravel driveway, remodel a kitchen or bathroom, etc. These
improvements are in addition to the maintenance and repairs. If you're the type of person who wants their furnishings,
decor, appliances, etc to be stylish, expect to pay for improvements fairly often. Here are some of the improvements
I've done on my house:

Painted rooms
Replaced baseboard mouldings
Remodeled the guest bathroom
Installed new ceiling fan in the living room
New curtains and blinds
Extended kitchen cabinets
Raised kitchen cupboards
Installed more lighting in the kitchen
Reworked laundry plumbing
Installed a utility sink in the laundry room
Installed cupboards in the laundry room
Installed a new sink in the kitchen
New granite counters in the kitchen
Built a new deck
Built a new front step
Installed skylight shades
Various yard improvements (e.g. new plants)

Doing the work yourself can save you a lot of money here too. For example, I built the deck on my house for about $15k,
which was roughly 1/2 the cost of the average estimates I received to have it built for me.
Higher Utility Costs
Houses are almost always larger than apartments, and require more energy to heat/cool. Expect to pay more simply because
of that. I suspect heating and cooling account for about half of my electricity use.
Rates keep increasing too. This affects home owners and renters, but it hits harder when you're heating or cooling a
larger house. The oldest bill I could find was from January 2024. Back then I was paying about 17.3¢ per kWh, including
all the fees and taxes. On my last bill for May 2026, I paid 24.7¢ per kWh. In only two years, my electricity rates have
gone up 42% 😲. I only expect this to get worse, since the rates here are (partly) determined by an auction process that
is affected by the demand for new data centers to support the current AI explosion.
Selling
Most people don't keep their home forever. When you move, expect to pay upwards of 10% of the value of the home just to
sell it!
I sold my home in Auburn, WA back in 2007, right as the housing crisis was ramping up. I was lucky to find a buyer
willing to pay a reasonable price for my house. I bought this house new, and didn't live there very long, so it didn't
need any preparation to be ready for the market. Here are some costs I paid to sell my house:

FEEAMOUNT

Commission$17,980.00
Title closing fee$626.18
Title insurance$1,009.66
Title wire fee$130.00
Title sales tax$11.58
Title reconveyance fee$115.00
County excise tax$5,932.40
Water settlement$37.92
Sewer settlement$135.43
HOA transfer and demand fee$60.00

That's $26,038.17 in costs to sell my home, not including the costs for moving (e.g. storage, shipping, etc).
Legal
If you have any conflict with neighbors (e.g. property boundary, trees, etc), you may need to hire an attorney,
surveyors, etc.
Appreciation
We hope that value of our homes increases over time. Home values have risen an average of 3.8% per year since 1991.
That's not a guarantee, and it depends on timing when you buy and sell, where the home is, and more.
I bought my home in Auburn, WA for $321k, and sold it a few years later for $333k. After all the costs to buy and sell
it, I probably lost more money on it than I would have spent renting an apartment.
I bought my current home in 2011 for $420k, and the Zillow currently estimates its value at $757k. I've put a lot of
money into it catching up on maintenance, repairs, and improvements, but the appreciation will definitely exceed
whatever I've put into it when I decide to sell it.
You should plan to live in your home long enough for the increase in value to exceed the expenses.
Should You Buy a Home?
If you buy a decent house in a decent area, and plan to live there for quite a while, then buying a home could make
sense.
Aside from the financial pros and cons, you have to consider the quality of life. More space and a quieter environment
are two very big advantages of owning a home in the right location.
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Understanding the true financial implications of homeownership requires examining a wide array of costs beyond the monthly mortgage payment. Eric Turner details these hidden expenses to argue against the notion that renting is simply throwing money away. The initial investment in securing a mortgage involves significant upfront costs, including origination fees, appraisal costs, title searches, and various recording fees, which can amount substantially. For example, the initial settlement costs for a home purchase included fees that totaled approximately three percent of the home's value.

The monthly mortgage payment involves principal and interest, where interest represents the majority of the initial payment, often about eighty percent, which functions as an expense that reduces net worth. While principal repayment does decrease the overall debt, the effect on immediate net worth in the early years can be minimal. Furthermore, many buyers may face Private Mortgage Insurance if a sufficient down payment is not met, an obligation that is eventually removed once equity thresholds are reached. Monthly payments also incorporate escrow amounts for property taxes and insurance, which are managed and paid out periodically.

Insurance costs are a recurring factor that increase annually, and homeowners must anticipate potential future expenses for major repairs or improvements necessary to maintain insurance coverage. Property taxes also need consideration, as they are subject to annual reassessments based on the property's updated value, and homeowners should investigate local programs, such as the Homestead Tax Credit, to mitigate assessment increases.

Beyond the direct mortgage components, maintaining a property incurs ongoing costs related to maintenance and repairs. Older properties, particularly those previously used as rentals, often require substantial capital for deferred maintenance, which can include large expenditures for replacing major components like roofs, windows, siding, and plumbing infrastructure. Turner suggests the general principle of saving at least one percent of the home's value annually to proactively manage these necessary repairs. Additionally, elective improvements, such as remodeling kitchens, adding exterior features, or renovating bathrooms, represent further financial commitments, though performing work as oneself can significantly reduce labor costs.

Utility costs are also a critical element; larger homes inherently demand more energy for heating and cooling, meaning these expenses are amplified. Furthermore, energy rates themselves are volatile and have increased substantially over time, demonstrating how external factors significantly impact the cost of utility usage.

The process of exiting homeownership also carries considerable financial weight. Selling a property involves numerous transaction costs, including real estate commissions, title fees, transfer taxes, and various settlement charges, which can total a significant percentage of the property's value. Beyond selling costs, homeowners must also account for potential appreciation, which is not guaranteed and depends on market timing and location. Turner notes that the realized financial outcome of buying and selling must be weighed against the cumulative expenses incurred, suggesting that the appreciation must sufficiently exceed the total costs over the ownership period. Ultimately, the decision to buy a home should be centered not only on the financial trade-offs but also on the quality of life advantages offered by living in a suitable location and the intention of long-term residency.