You'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:
| FEE | TOTAL |
|---|---|
| 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:
| ITEM | AMOUNT |
|---|---|
| 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:
| FEE | AMOUNT |
|---|---|
| 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.