The Cost of Homeownership Assessment
What is your home really costing you? Quickly and easily get the full picture beyond your mortgage to see how your spending stacks up.
Start calculating your true cost of homeownership now
Find out your all-in expenses, then get personalized guidance so you can make more confident decisions about budgeting for today and tomorrow. Whether you’re stretched thin, on track, or ahead of the game, we have you covered.
Beyond the mortgage: understanding all homeownership expenses
There are so many more unexpected or hidden costs of homeownership aside from your monthly mortgage payment that aren’t always top of mind when owning a home, and can add up quickly.
The cost of owning a home includes things such as:
- Property taxes
- Homeowners insurance premiums
- Private mortgage insurance (PMI)
- Escrow
- Utilities
- Maintenance
- Other hidden costs
You can estimate some or all of your own homeownership expenses using a variety of total cost of homeownership calculators.
There are also some calculations you can do on your own — such as determining your average utility costs per month by adding up the bills for your household. It can also be helpful to compare your costs to both local averages and common guidance.
Why it’s important to know your real costs
It’s important to understand the real cost of homeownership for a few different reasons: not only will it help you strengthen your financial planning, but it also helps ensure affordability and gives you peace of mind.
Can you afford your mortgage — now and later?
It’s one thing to be able to purchase your home — but taking on a mortgage is an investment that comes with significant responsibilities. Before you take the leap, it’s helpful to think long term about your future plans, including retirement, and potential curveballs, such as job change or loss, divorce, or single-income scenarios.
Compare your costs to regional norms
The cost of living varies greatly by area, so when you’re calculating your expenses and budget, you should always consider the averages and median figures relative to your location. A cost of living calculator can help you better understand how you stack up with respect to your region.
Compare to best practices (the 30% rule)
While not all budgeting or financial planning approaches work for everyone, it can be helpful to consider how your strategy stacks up against common advice. Since 1981, the U.S. government has recommended spending no more than 30% of your gross monthly income on your mortgage payment (though some resources suggest this should cover mortgage and utilities), which leaves room for unexpected and/or discretionary expenses without leaving you cost-burdened. We use this guideline as a baseline level for healthy spending in the calculator.
Understanding long-term affordability
Homeownership is a lifelong journey, and it’s important to consider your future plans and goals before committing to it. Your equity shifts over time, unexpected events happen, and circumstances change. The more you know about your spending and standing, the better, and having a concrete budget and plan from the outset can go a long way to help you maintain stability and continue to feel confident about your finances.
Turning insights into action
Knowing where you stand is half the battle — and we want to give you not only the numbers, but the next steps as well. What can you do with the results you receive from the assessment?
If your homeownership costs are too high…
You’ll receive resources for reducing your expenses, refinancing, and accessing your home equity.
If your homeownership costs are with the recommended range, but you’re still feeling the strain…
You’ll receive resources for budgeting, debt reduction, and proactive financial planning.
Key homeownership expense terms, explained
A primer on the words and phrases that will help you make the most of your assessment.
28/36 rule
A common guideline used by lenders to assess housing affordability and financial health for homebuyers that states that your monthly housing costs — mortgage, property taxes, insurance, etc. — should not exceed 28% of your gross monthly income, and that your total monthly debt payments, such as car loan, student loan, or credit card installments, should not exceed 36% of your gross monthly income.
30% rule
A common guideline for homeowners established by the U.S. government’s Department of Housing and Urban Development to assess housing affordability and financial health that states that your monthly mortgage cost should not exceed 30% of your gross monthly income.
Cost of homeownership
The cost of homeownership consists of mortgage, homeowners insurance, property taxes, utilities, and maintenance. The cost of homeownership and cost of living might sound similar, but they have some differences — and understanding them can help you determine the best tool to use (such as a monthly cost of owning a home calculator, true cost of homeownership calculator, or cost of living calculator).
Cost of living
The cost of living takes into account the expenses associated with living in a particular area, and includes food, transportation, healthcare, and more in addition to housing.
Escrow
The state in which money or documents are held by an objective third party prior to closing on a home.
PITI calculation (principal, interest, taxes, insurance)
A calculation that helps you determine your principal, interest, taxes, and insurance. The PITI calculation is as follows:
- Determine estimated monthly principal and interest (P&I) payment with a mortgage calculator
- Add the monthly cost of property taxes and homeowners insurance (divide annual totals by 12)
The total of these two numbers will give you your total monthly PITI payment.
PMI (Private mortgage insurance)
The type of insurance that’s usually required when a homebuyer puts less than 20% down on a home. You can typically remove PMI when your loan-to-value ratio (LTV) reaches 80%.
Property taxes
The taxes a homeowner pays to their local government, which are used to fund public needs in the community like education, road repairs, snow removal, and more. Property tax amounts are dependent on home value and location.
Utilities
These are home services, such as electricity, water, or gas, that you pay for each month as a homeowner. It’s helpful to know your average monthly utility costs so you can better budget.
