How to save money after buying a house

"How much should I save before buying a house" is commonly asked on the homebuyer's journey, but it's equally important to ask, "How do I save money after buying a house?"

Along with the requisite mortgage payments after buying a home, there are many ongoing costs that can affect monthly expenses. These include property taxes, home maintenance, household repairs, insurance, higher utilities, and more. At the same time, saving for long-term goals, like retirement, shouldn't be put on hold.

This article explains how new homeowners might want to adjust their budget to account for the changing costs that come with owning a home.

The common costs of homeownership

There are many costs involved with homeownership, including mortgage payments, homeowners insurance, utilities, homeowners association (HOA) fees, maintenance, and property taxes. The actual costs of homeownership will depend on factors like property location, size, age, and condition. Personal preferences and lifestyles may also play a part in monthly expenses.

According to HomeGuide, these are the average costs of typical homeownership expenses¹:

• Property taxes: 0.5% – 1% of the mortgage balance annually
• Homeowners insurance: $150 – $270 per month
• Home maintenance costs: 1% – 4% of home value annually
• Utility costs: $500 – $600 per month
• HOA, community development district (CDD), or condo fees: $100 – $500 per month

Property taxes

Property taxes help pay for public services, like schools and police, and infrastructure in the community. Property taxes can vary widely depending on the location and value of the home.

To find out how much of the monthly expenses should go to property tax, calculate 0.5% – 1% of the mortgage balance annually¹, then divide by 12 to get a rough monthly amount to set aside.

Homeowners insurance

Homeowners insurance is a financial protection that a homeowner buys from an insurance provider that can protect against damages in the event of fire, theft, natural disaster, or other scenarios.

How much homeowners insurance is needed usually depends on how much it costs to rebuild the house and the personal and liability coverage chosen on the plan, among other factors.

Consider how much insurance is appropriate for your home and plan to shop around to find competitive rates.

Maintenance and repairs

Budgeting for regular maintenance and repairs of a home should be a key line item on a budget. Average home maintenance costs can run from between 1% to 4% of the home's value annually.¹ Try to put aside what you can per month for inevitable upgrades.

While some maintenance is predictable, unexpected repairs can upend a budget. Building an emergency savings is a way to create a financial cushion for unexpected expenses and help avoid debt.

Utilities

Average home utilities expenses can range from around $500 to $600 per month on average.² But this is only an average. To build a budget for one's own utility expenses, add up (or estimate) each utility bill for a year, then divide by 12. Putting money aside into a sinking fund for these expense could be beneficial. There also may be opportunities for cost savings after analyzing a year's worth of bills.

Potential HOA fees

If you live in a community with an HOA, there may be additional fees per month or year that need to be added to the budget. These fees would cover common area maintenance and amenities of the property your home is on, such as a pool or other services. There are also community development districts and condominiums that charge similar fees.

How much to save after buying a house

There's no one-size-fits-all answer to how much should be put aside after buying a home.

One strategy is to start building a separate fund from the outset that could help cover unexpected costs beyond homeownership – so, while still covering all the necessary expenses, there's a cushion for emergencies.

But to be more precise, it's recommended to have a minimum of six-to-nine months' worth of living expenses after closing on a home. If practical, some homeowners work to build up to 20% of the home's value in a reserve fund.² Keep in mind, the goal will be different for every homebuyer depending on their specific situation.

Tips for saving money after buying a house

Certain strategies can help to save money after a large investment and help buyers keep finances under control. Money-saving apps can be tailored for any goal, big or small. A bank's website or digital wallet also often has tools for automating savings, creating different accounts for specific needs, and using various calculators to get ahead of costs.

Here are some ways to start:

Review and set a budget

A new home means new expenses. Be sure to evaluate existing budgets to include the updated costs of homeownership.

A common mistake among new homeowners is spending more than they can afford. So, redoing a budget to suit the new circumstances can help identify potential areas to cut back and re-allocate funds.

For example, if a previous property was a rental and maintenance fees were paid to the owner, make sure to carry that line item over and continue to put money away for maintenance on your home.