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Mortgage rates they've been stubbornly high recently, hovering around 7% for much of 2024. Those rates have pushed up monthly mortgage payments in turn, with the average monthly mortgage now over $2,200.
And, unfortunately for homebuyers, interest rates and loan payments aren't the only costs incurred when buying a house. Experts say the cost of buying a home can be even more expensive than that, and there are costs that may not come to mind when you're planning to buy a home.
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5 hidden costs to consider when buying a house, according to experts
Want to be better prepared for your home purchase? Here are the hidden ones housing purchase costs experts say to watch out for:
Transfer costs
According to experts, moving expenses are a cost that many homebuyers don't plan for.
“People prepare for the buying process, but not for all the items that come after the signing table,” says Kristen Skebe, managing broker and real estate advisor at Engel & Volkers Atlanta. “This includes potential costs for setting up utilities, trucking and moving and storage unit fees if needed. These items can be very expensive, especially when moving across state lines.”
Thumbtack data shows that hiring movers for a local move (less than 50 miles away) averages about $120 per hour. For long-distance moves, you can expect to pay more.
And while you may be able to save money by doing your DIY move, it likely won't come completely free.
“You'll still spend hundreds of dollars between the gas driving round trip and buying boxes and other packing materials,” says Darren Tooley, loan officer at Cornerstone Financial Services.
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Maintenance and repairs
The maintenance and repair costs after the move often surprises people, too, experts say.
“Once you close on a home, your expenses are just beginning,” says Tooley. “Typical maintenance costs can range from 1% to 4% of the home's value, but could be much more if you need to pay for larger items like a replacement roof or new windows.”
Older homes tend to have higher maintenance and repair costs, but new homes are not completely free of these expenses. You'll still have to pay for regular HVAC tune-ups, gutter cleaning, pest control services, lawn care, and more.
Home insurance
Homeowners Insurance is another major expense that buyers often overlook. Not only will you have to pay upfront, but it's also part of your monthly payment.
“Depending on the location of the property, insurance can be very expensive,” says David Harris, a real estate agent at Coldwell Banker Warburg. “Properties within states and locations prone to severe weather or natural disasters will likely pay much higher insurance premiums.”
Home insurance requires annual renewal, so your premiums can also increase over time. When this happens, it can affect your mortgage payment up too
“Buyers should be aware that even though your mortgage (principal and interest) is a fixed monthly amount, the total mortgage payment that includes property taxes and insurance can vary from year to year,” says Gordy Marks, Realtor with RE/MAX NW. . “If your home insurance or property taxes go up, your mortgage payment can go up.”
Mortgage insurance
If you made a small down payment (usually less than 20%), you will probably have to pay Private Mortgage Insurance (PMI), too. This is also included in your monthly payment and may mean higher costs once you are home.
“Lenders typically require PMI to protect themselves in case the borrower defaults on the loan,” says Seth Bellas, a home loan specialist at Churchill Mortgage. “PMI costs vary, but can add a significant amount to your monthly mortgage payments.”
According to Freddie Mac, PMI adds $30 to $70 per month for every $100,000 you borrow. So with a $300,000 loan, you'd pay an extra $90 to $210 a month.
Property taxes
While most people know that they will owe home ownership taxes, few are fully prepared for what those costs will be. For one thing, depending on the time of year you buy your home, you may owe a large portion of your property taxes up front as part of your closing costs.
In addition to this, you will usually have to pay a portion of your taxes each month, as part of your mortgage payment. And if the value of your home goes up, which happens often, it sends you the tax bill and monthly payment.
“Your property tax bill can change from year to year,” says Chris Gleason, founder of RAM Financial Group and Simplicite Tax Loans. “So even if you budget the first year, it doesn't necessarily mean your bill will be the same the second year. The biggest mistake homebuyers make is they look at the current home tax bill and they assume it will be the same for them.”
Gleason says using a tax calculator provided by your local assessment department can help you get a rough idea of what future property taxes might be, or you can call the tax assessor directly to get an estimate.
“The tricky thing about property tax spending is that it's almost impossible to quantify with a broad brush,” Gleason says. “Property taxes are calculated and calculated differently almost everywhere.”
The bottom line
Understanding the total costs of home ownership is vital before buying a home. If you need help preparing to buy your home or want help getting one lower mortgage rate, work with an experienced mortgage professional and also consider talking to a financial advisor. They can help you plan for the full scope of home buying (and property) expenses.
