The Monthly Cost of Home Ownership
First thing first, congratulations are in order! You’re a homeowner. After years of careful saving, combing through listings, house tours, and more, you found yourself the perfect place to call home. It’s a great feeling when the keys are handed over to you for the first time.
And now that the initial cost is out of the way, it’s time to revisit that budget you created to save for your home and change it up. Now, you need to afford the monthly cost of home ownership—and this goes beyond the new throw blanket for the guestroom or your dream kitchen renovation.
In this article, we’ll break down the costs of home ownership you can see pop up in your monthly budget, why these costs are necessary, and how to make sure you aren’t overpaying—after all, you still do deserve that new throw blanket.
So, what’s the true cost of home ownership?
There’s no one true answer to the cost of home ownership, because it varies so much between households—for both fixed costs and unexpected costs. No two homes will have the exact same monthly costs!
For example, if you buy a $1,000,000 home, your monthly mortgage payment is going to be way higher than somebody who buys a $250,000 home. The cost of heating a larger home is going to be higher than a smaller home. These costs all add up, so it’s no wonder there’s no one answer to the true cost of home ownership.
However, there are some expenses beyond these costs you can expect every month. You also have to consider the unexpected home ownership expenses that don’t fall neatly into these monthly bills. Things like:
- Repairing a leaky roof
- Paying pest control to get a creature out of the house (you mean, you don’t want a pet raccoon living in your walls?)
- Different electrical issues are costs that can be rather pricey and happen on a (hopefully!) sporadic basis
Keeping in mind these surprise costs of home ownership you’ll inevitably face during this chapter of your life, let’s look at the expenses you can count on with each flip of the calendar page.
Monthly mortgage payments
No doubt you’re sick of hearing about mortgages at this point in your home shopping experience, but that monthly payment is a huge part of the costs of owning a home! Each mortgage payment goes towards your mortgage, causing the balance left on it to lower with each payment.
You have to be able to make these monthly payments, because it can lead to your home being foreclosed on if you don’t. Making note of your monthly mortgage payment as part of your costs of home ownership is key to budget for—if you don’t, you could literally lose your home.
You didn’t buy your home to live in it without electricity, water, heat, or Internet, right?
Every month, you have to pay for these things to get to use them on a monthly basis, so ensure that you’re budgeting for this cost of home ownership. If you don’t have enough to pay, you’re at risk of having these services shut down by the city.
But this is where it can be a little tricky. You have to remember that, while this is a monthly cost of owning a home, the actual bill will vary each month. Your usage will either raise or lower the bill, so it pays to be smart about your energy usage.
If your utility bills are skyrocketing out of control, here are some tips to help you keep them more manageable:
- Wear clothing indoors based on weather: If you’re still repping shorts and a tank top indoors during the winter, you’ll be tempted to crank the thermostat to keep yourself warm. When you dress to regulate your own temperature more—like a sweater in colder months—you can manage how you feel without the extra cost
- Replace air filter: The purpose of your air filter is to catch things like dust, pollen, and lint before they end up circulating in your home. A clean filter helps to ensure your HVAC (heating, ventilation and air conditioning) system is in top working order. When your system is working optimally, it reduces the work it has to do and, in turn, reduces your monthly bill!
- Use energy-efficient appliances: Hopefully with moving into a new home you aren’t facing a ton of super old appliances, but if so you’ll want to consider getting new ones! Old appliances can be super inefficient in their energy use, causing your bills to skyrocket
- Look at time of use hours: Something as small as when you’re using your appliances can have a huge impact on your monthly bills. Most municipalities have time-of-use rates (TOU). Certain hours are considered “peak time” and using appliances like your dishwasher or washing machine will actually cost more at these times. Make sure to check your area’s TOU rates and try to adjust accordingly! If you’re in Ontario, you can see the TOU rates from the Ontario Energy Board here.
This may not be unexpected, but paying your home insurance premium will be a part of the monthly costs of homeownership.
Home insurance protects your home, simply put. If something were to happen to your actual home or the belongings inside, it would cover the costs of repairs or replacement.
In Ontario, home insurance isn’t actually legally required, but most mortgage lenders will require proof of home insurance before they will confidently lend to you. It makes sense—they want to be covered as well!
Also, if something happens to your home, that can be more expensive than a monthly home insurance premium. Can you afford to hand over thousands of dollars to get it repaired right away, or to replace valuable items? The cost of these emergencies tends to outweigh your monthly home insurance premium.
To make sure you aren’t overpaying on your home insurance, make sure to receive quotes from numerous providers! If you settle on the first offer, you could miss a better deal.
Pro tip: If you also have a car or cars, see if you can bundle your home and car insurance together! You may be able to get some major savings when you’re getting both of these insurances at the same time.
This may be a little more unexpected than home insurance, but life insurance is a huge part of responsible home ownership, and therefore a monthly cost in home ownership.
Think of it this way: if you’re living with your partner and something happens to you, you would be strapping them with all the costs of your home. Up until this point, you’ve both been contributing, so this could be a huge financial strain. Having life insurance protects you, your partner, and your new home.
Pro tip: You can apply for a joint life insurance policy together to make the shopping process even easier!
A big mistake made by home owners is buying mortgage life insurance—this purchase is actually a huge factor that has been leading to Canadians overpaying for life insurance by 36%! Mortgage life insurance tends to be way more expensive than a term life insurance plan, and the money goes right to your mortgage lender.
Keep in mind that your regular life insurance can go towards the exact same expense, but this gives your beneficiary flexibility! They can use it to pay the monthly mortgage costs, either completely up front, or on any expenses you have as a couple.
Monthly property tax
Another monthly expense you’re going to see as a new home owner is your monthly property taxes! These taxes go towards paying for local services that you as a homeowner benefit from, including:
- Snow removal in the winter
- Road maintenance
- Recycling and garbage removal
And that’s just a few of the services that your property tax help to fund!
The monthly property tax varies between municipalities, so you can look at your rates on the Ontario website. The factors that go into calculating your tax include the general municipal tax rate, education tax rate, and value of your property – the more expensive your home, the higher the property tax (naturally).
Deposits to a savings account
Remember those unexpected expenses from earlier? Yeah, when you make putting aside savings for a rainy day a part of your monthly ‘expenses,’ those unexpected stumbles don’t have to mean loans or maxed out credit cards.
From the start of home ownership, set up your monthly expenses to include a chunk of money being sent straight to savings! These savings can be put towards anything in the future:
- That new kitchen
- An emergency fund
- Money to keep you afloat if something happens to your income
Plus, if the money is being withdrawn from your income right away as a monthly expense, you won’t be tempted to spend it!
Out of sight, out of mind, right?
These expenses won’t come as a shock when you’re prepared for them! With some smart savings (habits you clearly already have), the cost of home ownership each month will be manageable and that new kitchen can be on the radar. It’s not one or the other – it’s tackling them both responsibly.
You managed to put enough money aside to buy your dream home, so this part will be a piece of cake.
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Boil half an egg?
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