When closing on a home, it’s tempting not to think beyond the immediate costs—the downpayment, the monthly mortgage, and other fees. But when it comes to luxury homes in particular, there are unexpected costs that can quickly add up.
According to a study by Zillow and Thumbtack from 2018, the cost to the average homeowner from things like insurance, maintenance, and more came up to $9,390 every year. But in pricier cities with higher-end housing markets, these extra expenses could be much higher. The Zillow research showed that in San Jose at the time, the average homeowner was spending over $20,000 per year on maintenance and insurance.
On the one hand, this should hardly be surprising. Unless you plan on letting your property go completely, any homeowner will have some maintenance and insurance costs. But there are circumstances that are more unique to the luxury home market.
For instance, beachfront homes are popular as vacation homes, but being located so close to the ocean can be a liability. All the salt in the nearby water and surrounding air can damage paint and corrode pipes. External HVAC systems can also be seriously damaged by sea salt in the air. Such homes often come with pools too, which require a lot of maintenance.
Luxury homes often come with sky-high insurance costs. In addition to the value of the home in itself, the cost of replacing certain expensive materials and amenities can be a liability. Certain difficult to replace luxury items, like art or a private wine collection, can also drive up premiums.
This isn’t helped by the fact that many luxury homes are located in states like California and Florida. The risk of earthquakes and wildfires in the former and flooding and hurricanes in the latter drives up insurance costs significantly.
The bottom line is simple. As always in real estate, do your due diligence. It can be easy to get myopic and only think about the downpayment and your monthly mortgage. Even if money is no object, you should make sure you know all the costs and liabilities before you close in order to avoid any unpleasant and avoidable surprises.