The True Cost of Buying a home

The True Cost of Buying a Home

At some point in the life of all long-term renters the question of home ownership inevitably arises. But the true cost of buying a home is somewhat difficult to calculate. Even so, your friends and family love to lecture you about how much money you’re throwing away by not owning a property.

Family: “Your rent is more expensive than my mortgage! Why are you throwing so much money away?”

Me: “But my rent includes all major appliances, utilities, internet, repairs, property maintenance, security, HOA and a two car heated garage.”

Family: “But you’re still throwing money away by renting because you will never own the property you live in.”

Me: “What if I invest the money I save by not paying for all of those expenses separately? ”

Family: “Well you can’t raise children in an apartment”

Me: “I don’t have children! … And I think you can, at least until they become sentient.”

Now I don’t deny that owning a home is ideal for families and can serve as a highly stable and profitable investment. But the way people (usually the one’s we love the most) push housing, you’d think home ownership were some kind of cult. More likely, our loved ones feel like owning a home is still the true mark of a fully realized, American adult.  Unless you join the suburb club you’re just one missed rent payment from living on the streets.

My wife has grown more and more dedicated to buying a home as the years roll by and, as with most things my wife dedicates herself to, it will eventually become reality. So I started looking into the various costs associated with buying and maintaining a home and I became dismayed. Housing prices in my area have become incredibly expensive.

$450,000 buys me a 1,200 square-foot box in wonderful Louisville, Colorado [2021 update, more like $550k now) . I’ve searched in other areas but properties everywhere seem over-valued. What once afforded you a four bedroom, four bathroom home now gets you a two bedroom townhouse… If you’re lucky.

The True Cost of Buying a Home – Common Costs Table

First Year Home Expenses

Here are some average costs for first year homeowners. Not all of these expenses apply to every home sale, but this table demonstrates how quickly these costs can add up. The figures I used were derived from a number of resources and calculators and are typical of family homes across major US city suburbs. For this example I used a $350,000 home with an interest rate of 4.2% and a $20,000 down payment.
Expense/TotalMonthly Amount
Mortgage- $350K, $20K down, 30 YR @ 4.2%:$1,617
Private Mortgage Insurance: $260
Home Insurance: $102
Property Tax: $187
HOA Fee (low estimate): $200
Utilities: $250
Sub Total: $2,616/Month
Other Expenses
Closing Costs- $7,133 Paid up front or wrapped into the loan.
Appliances: $2,200$183
Furniture: $2,000$167
Painting/Updating: $500$42
Landscaping: $5,000$417
Sub Total: $809
Total: $3,425/Month



  • Private Mortgage Insurance:
    One of the downsides to buying your first home is that you probably won’t have a large enough down payment to avoid PMI. Lenders use these payments as security against your loan; however, once you pay upto 20% of your loan you may refinance to remove this cost.
  • Homeowners Insurance:
    Typically between $500 and $3000 per year and cover involuntary damages, caused in a variety of circumstances.
  • Property Tax:
    Tax based on the value of the property.
  • HOA Fee:
    Homeowners Association costs cover the costs of a group that upholds the standards of a community. This may include enforcing landscaping, maintenance and upkeep and may limit your alterations to your property.
  • Closing Costs:
    This expense covers the amounts required to close the sale, often including the cost of appraisal, credit report and Loan Origination Fees among others. Closing costs may be paid by either the buyer or seller of the property and are paid up front or over the term of the loan. For the purposes of the table, I did not include the amount as a monthly expense.

Second Year Home Expenses

Here are some typical second year home expenses broken down into monthly payment amounts. The furniture, appliances and landscaping costs are replaced by lower "maintenance expenses."
Expense/Total Monthly Amount
Mortgage $350K, $20K down, 30 YR @ 4.2%:$1,617
Private Mortgage Insurance: $260
Home Owner's Insurance: $102
Property Tax- $2,244/ YR: $187
HOA Fee: $200
Utilities: $250
Maintenance- $350K x 1% /12 Months:$292
Total: $2,690/Month

After a few years the true cost of buying a home (and owning one) decreases significantly. Hopefully your property has increased in value and you can use the profits from the sale for a down payment to avoid PMI payments.

True Cost of Buying a Home: Best Case Scenario

You pay 20% down, own furniture, do most of your own repairs and minimize utility costs with energy efficient appliances. If you move into a community with no HOA fees and buy the same $350K home, your costs are now about $1,377 less per month than they were during the first year.
Expense/Total Monthly Amount
Mortgage $350K, $20K down, 30 YR @ 4.2%:$1,617
Home Owner's Insurance: $102
Property Tax- $2,244/ YR: $187
Utilities: $1,700 $142

Final Considerations:

Beyond the various cost considerations outlined above, owning a house also entails a bigger dedication of time. With a greater area to clean, more yard to maintain and more snow to shovel, and without a maid, owning a house can easy become a drain on time. But some would say that’s a small price to pay for the pride you feel when you own a home. For us, the true cost of buying a home currently outweighs the benefits, at least while it’s just the two of us.

Is it a good time to buy? Let me know in the comments!


  1. I maintain a passive interest in real estate values/sales in my local area, Louisville included. An acquaintance of mine tried desperately for months to get a bid on a house. Almost every bid he put in was immediately outbid by another potential buyer – he would regularly bid the asking price or more. Many of these outbids were done by people that were offering full cash!
    We barely scraped by 5% for our first house’s down payment several years ago, and now I see the market has turned crazy – I would even say, hostile, for first time buyers. It is insane. I [tentatively] recommend scouting for short-sale and foreclosures as long as you’re willing to put in extra time and work into a home like that…IFF you’re looking for a house that is. That’s how trends go. But, renting allows you more flexibility and less liability, as you’ve pointed out.

    1. Oh man, it’s worse than I thought… I’ve been reading about this growing trend of millennials not purchasing property anymore and with the current price trends of real estate it’s not hard to see why.

  2. Ayuuup. Home ownership costs way more than I thought it would. I knew it *would* be more expensive, but it’s expensive in different ways. For example, our “Other” category in our budget has nearly doubled since we bought a house. Especially since we’re in our first year of ownership, there’s going to be a lot of extra expenses. But it’s worth it. 🙂

    1. I’m sure after all the obstacles are out of the way homeowners can look back and really feel it was all worth it.. But as the prices go up, it’s getting harder and harder to see the light at the end of the tunnel.

  3. You could add the costs of yard upkeep – water, gardening, fertilizer, lawn mowing, hedge trimming and cost out the millions of hours spent on that. And the cost of upkeep, maintenance, repairs, new purchases eg water heater, roof.

    You can cost out the hours to clean that big old house. How about the added stress to a marriage from centering your life and wallet around a house?

    While the market tends to go up for real estate you can certainly not count on it, eg 2008 to 2013. Then you have to deal with neighbors. If they are nice you gotta go to their parties. If they are not nice you got another set of problems.

    Thanks for such an insightful and contrarian position. Come to think of it, it is a cult!!

    1. Thanks for reading. There are so many hidden costs that its hard to get a good estimate on realistic totals!

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