What is the true cost of buying and owning a home? Turns out, there’s a lot of confusion out there.
Esurance, which sells auto, rental and home insurance, recently polled 2,000 Americans to test their knowledge about closing costs and homeownership expenses, and the results may come as a surprise.
Here are some key takeaways that real estate professionals should be aware of so they can better educate their clients:
- 4 in 10 respondents weren’t sure what to expect for closing costs. Almost 20 percent of respondents said they expect to pay “nothing” in closing costs, while 44 percent said they had no idea what they would have to pay. Only 14 percent of respondents answered the question correctly, estimating closing fees to fall into the range of 2 to 5 percent of the home’s price.
- 43 percent of respondents weren’t sure what to expect in terms of ongoing homeownership expenses. Excluding monthly mortgage payments, the average annual cost of homeownership, including property taxes, homeowner association fees, insurance, utilities and costs for maintenance and repairs, is approximately $9,400. But only 7 percent of respondents knew that. Twenty percent estimated expenses to be between $1,000 and $3,000 a year and 43 percent said they didn’t know what their ongoing expenses would be. Gen Z and millennials were the least informed. Fifty-one percent of them weren’t sure what to budget for ongoing homeownership costs, compared to 39 percent of those ages 55 and up.
Another recent study touching on the true costs of homeownership found that most new homeowners aren’t budgeting enough to cover mortgage payments, down payment and closing costs. Conducted by homebuying platform Clever Real Estate, the study suggested homeowners were underbudgeting by approximately $13,000 a year. As a result, 59 percent of homeowners who are planning improvements over the next five years said they planned to use a loan or credit card to pay for work done on their house.
Despite the unforeseen costs, 65 percent of homeowners in the study said they’ve never felt homebuyer’s remorse.