Office of Loan Programs

The Hidden Costs of Home Ownership
Ruth Assily
August 1999

It is tempting to think that once the down payment has been made and escrow has closed, that the major costs of home ownership have been paid. Unfortunately, as discovered in a recent survey by the Wall Street Journal, this is not true.

The survey noted that the cost of keeping a typical home up to current standards is almost four times the purchase price. These costs include everything from replacing worn carpets to updating the kitchen. Many homeowners are conscious of the obvious, visible improvements that need to be made: windows, doors, appliances. What many forget, however, are the "hidden" parts of the house that need replacement: roof, furnace, water heaters.

Typically, homeowners will improve when they replace. Experts advise homeowners to remember that remodeling a home improves the livability while you live there as well as the curb appeal for the potential buyer down the road. Traditionally, the highest home remodeling returns have come from updating kitchens and baths. Recently, home office additions as well as upgraded amenities (light fixtures, ceiling fans, laminate floors) are also popular and may payback a significant portion of the cost when you sell your home.

If you are handy, many remodeling jobs can be done by yourself. If you do not enjoy the work, or do not feel confident in attempting a major project, your next step in home improvement is hiring a contractor. Your best sources for finding a contractor is word of mouth: friends, neighbors, and co-workers who have had similar work done and were satisfied with the results. When interviewing contractors, make sure you ask if they are licensed by the State of California. Contractors that are licensed by the State have at least four years of work experience, have passed a written test assessing their knowledge of their trade, are bonded, and carry Workers' Compensation Insurance. In addition, we recommend you ask for, and review, references.

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