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12 Tips for Managing Mortgage and Homeownership Expenses

By Thomas O'Shaughnessy | August 22, 2023

Buying a home is the most substantial investment many will make in their lifetime. For new homeowners, signing on the dotted line means committing to a monthly mortgage payment that may be more than they have ever spent on housing. But that’s not the only expense that comes with a new home. Many people are caught off guard when mortgage and homeownership expenses pop up. Fortunately, there are ways to protect yourself and prepare for these expenses — even when they are unexpected. 

The true cost of homeownership

There’s the price you pay for your home, and then there’s everything else. The true cost of homeownership goes far beyond your home’s sticker price, and it begins at the closing table. At closing, you’ll be responsible for the following:

  • Title fees
  • Realtor commissions
  • Taxes
  • Insurance

Closing fees vary by state. Some people avoid them by going through companies that buy homes with cash (and limit the amount of closing fees they collect). 

Your mortgage payment every month may include your homeowners insurance. If you put less than 20% down, you’ll also be paying private mortgage insurance (PMI). This protects the bank if you were to stop paying your loan.

But that’s just where the additional costs begin. If you are a lifelong apartment dweller, the following additional expenses may not have crossed your mind:

  • Pest control
  • Landscaping
  • Routine maintenance
  • Remodeling expenses
  • Property
  • Homeowners association fees

If you are moving into a larger home, you’ll also need to think about furniture and window treatments. Considering painting or updating fixtures? That’s another expense.

12 tips for managing mortgage and homeownership expenses

The good news? You can plan ahead for even the most unexpected expenses associated with getting a mortgage and maintaining a home. Here are 12 tips to get you started.

1. Begin with a budget

When you are ready to start living the dream, a budget is your best friend. Figure out what you can afford to pay monthly, and don’t forget to include property taxes (and PMI if you are looking at alternatives to a traditional mortgage). If you’ve never owned a home before, it can be helpful to talk with your realtor about what realistic expenses might be.

2. Shop around for a mortgage lender

There are many ways to pay off a mortgage faster, but plan ahead by shopping around for a mortgage. There can be considerable variation in interest rates and fees associated with the mortgage. Take the time to research your options.

3. Get pre-approved for a mortgage

Once you find your lender, get pre-approved. This makes the home-buying process more manageable and gives you a better idea of how much home you can afford.

4. Stay away from your upper limit

Consider this: you get pre-approved for a $500,000 mortgage and find a home that costs precisely that much. You’ll need to come up with $100,000 down to avoid PMI, but that’s not all. Closing costs can add as much as 6% to the price of your home. If your total home-buying budget was $500,000, you’ll get past that limit fast and have nothing left over for emergencies.

5. Build an emergency fund

Having an emergency fund is a critical part of homeownership. As a general rule, keep enough money in an easy-to-access, high-interest savings account to cover three to six months of expenses. This will keep you covered in the event of medical emergencies or unexpected major home repairs.

6. Keep up with maintenance

Keeping your home and its systems in good repair with regular maintenance is an excellent way to prevent disaster from happening. Get your HVAC systems routinely inspected, and stay on top of minor issues that arise. 

7. Double-check your tax assessment

Property tax assessments that do not reflect declining neighborhood home values or a property purchased in disrepair might cause you to pay excessive taxes. Check your assessment regularly, and contest it if you feel there’s an error.

8. Get the best insurance rate

Homeowners insurance is required, but you still have options. Check with at least three insurance companies to get the best rate. Make sure they offer identical amounts of coverage. 

9. Be efficient

Energy-efficient appliances, windows, and insulation can save thousands of dollars annually. The federal government and many localities also offer significant tax benefits when you swap out old, drafty windows for new ones. The same goes for adding additional insulation or investing in alternative energy such as solar or wind power. 

10. Refinance when it makes sense

Another tool to manage mortgage expenses is refinancing. This can be especially powerful if you’ve chosen a mortgage with a variable rate. When the rate drops, take that opportunity to lock it in for tens of thousands of dollars in savings over the life of your mortgage. Even if you have a locked-in rate, paying attention to mortgage rates makes good sense. 

Regardless of your mortgage type, check to make sure the refinancing fees don’t outweigh the potential benefit. 

11. Stay away from home equity loans

A home equity loan (HELOC) can be a valuable tool in some conditions. A HELOC might work well if you have a clear idea of what you would like to use the money for and a plan to pay it back. But simply borrowing against your home’s equity for a family vacation can backfire and put your home at risk if the monthly payment rises beyond what you can afford.

12. Follow the market

You may have purchased your home intending to live there for the rest of your days, but keeping an eye on the housing market is still essential. Fluctuations in property values and home-buying trends influence everything from insurance rates to property taxes. These also dictate your home’s value — you might change your plans if your home’s value skyrockets.

Is homeownership worth the expense?

Even with all of the unexpected expenses of homeownership, the majority of Americans still believe it’s worth it. If you decide buying a home is right for you, following these simple tips to plan for mortgage and homeownership expenses can help you better manage your expenses. 

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