Planning for the Costs of Homeownership

If your mortgage payment includes an escrow account, part of the payment may be collected for property taxes and homeowners insurance. The mortgage company then pays those bills when they are due.

Escrow does not mean the amounts are fixed. Taxes or insurance premiums may rise, which can increase your monthly payment even if you have a fixed-rate mortgage.

Review your annual escrow statement and insurance renewal notice. If the payment changes, understand why and update your household budget.

Depending on your home, you may also pay for:

Some are monthly. Others arrive once or twice a year. Convert occasional costs into a monthly amount so they are easier to prepare for.

For example, if a service costs $360 each year, setting aside $30 per month prevents the full amount from becoming a surprise.

No home remains maintenance-free forever. Even a new home will eventually need filters, caulk, paint, servicing, and replacement parts.

Create a home maintenance category in your monthly budget. There is no single amount that fits every home. The age, size, condition, climate, and type of systems all matter.

Start with an amount you can manage and increase it over time. Saving something consistently is more useful than waiting until you can save the perfect amount.

Review your homeowners policy each year. Make sure the coverage still reflects the home and any improvements you have made.

Ask what is covered, what is excluded, and how much you would pay out of pocket through the deductible. The least expensive premium is not always the least expensive policy after a loss.

You may also need separate coverage for risks such as flooding or earthquakes, depending on your location and policy.

Consider dividing home expenses into three categories:

Keep occasional expenses in a sinking fund and unexpected expenses in an emergency fund. Giving each dollar a purpose makes it less tempting to spend money intended for the home.