top of page

Caden Heyen

The Slim Report

Search

Hidden Costs of Homeownership [Post 15]

Writer: Caden Heyen
Caden Heyen
Apr 5, 2023
2 min read

What I’m Hearing

I’ve heard more than once, “Renting an apartment is like burning money. I can spend the same amount on a mortgage and own a house instead.” However, this isn’t entirely accurate as buying a house has sunk costs to consider.


Homeowner Simulation

Let’s say you have your eye on a $240,000 house. All you have to do is pay your monthly mortgage and it’s yours! Right?


Not exactly.


In the first year of being a homeowner here are some estimated expenses to consider:

  • Closing Costs - $12,000 (estimated 5% of home value)

  • Down Payment - $48,000 (estimated 20% of home value)

  • Payments on a 15-year mortgage at a 5% interest rate - $18,000 ($1,500/mo)1

  • Utilities - $3,000 (estimated $250/mo)

  • Property Taxes - $4,800 (estimated 2% of home value)

  • Homeowner’s Insurance - $1,380 (estimated $115/mo)

  • Miscellaneous Repairs - $2,400 (estimated 1% of home value)

Year one can sting… totaling $89,580 in our example. There are many more costs to consider when buying a home than just the mortgage payments.


Summary

This post was not meant to discourage any prospective homebuyers but instead help someone who may gloss over hidden costs involved in homeownership.


A frugal saver can advantageously rent an apartment and save/invest their excess dollars until they are certain being a homeowner is the right decision for them. Over the last 30 years, the average growth rate for housing prices in the US was 5.3% while the US stock market returned 9.65%.2 This is no indication stocks will outpace real estate going forward but it does show there are alternative options for what to do with your money than pay for a house over the next 10 to 30 years.


1. Mortgage calculator. (2023). Mortgage Calculator & Loan Calculator.

https://www.mortgagecalculator.org/

2. Investopedia. (July 27, 2022). Which Has Performed Better Historically: Stock Market or Real Estate?

https://www.investopedia.com/ask/answers/052015/which-has-performed-better-historically-stock-market-or-real-estate.asp

 
 
bottom of page