Don’t get frightened, because the costs of homeownership are bearable, as long as you what are they and when they’re coming. It can come as a shock to realize that there are more expenses attached to the monthly principal and interest on your new home mortgage. However, more and more young renters are deciding to purchase their own homes because they’re tired of seeing their rent costs increase every year. Along with more affordable home prices in certain housing markets, relatively low mortgage rates are creating renewed interest in homeownership, which is seen as a path to a better financial future.
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However, there are always those who come unprepared. They take out their wallets and checkbooks to pay for it, not knowing the true cost of owning a property. As long as you know what’s coming your way, you can even bring the whole property in line with your budget by scaling down the size of the house you’re looking for. We present you the list of 11 most common, hidden costs of owning a home.
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Paying property taxes cannot be avoided. They could go up, even if your home loan comes at a fixed rate, and increase your monthly housing costs. Visit the Bad Credit Loans website and use their loan calculator to see how much of a loan you can get. So, consider them a good thing, because the fire department will come when you call. You may be responsible for both county and city taxes, depending on where you live. Before you sign a mortgage contract, find out the final number of your monthly payment to avoid potential headaches.
2. Appraisal and inspection fees
You need to pay for an appraisal, home inspection, and possibly some inspections for the chemical radon or pests before you buy a home. These costs are taken care by the buyers, and it’s highly recommended to do it in order to avoid paying too much in case the property is flawed.
The cost of insurance depends on many different factors, which may include the location and construction materials of your home. You’ll find home insurance costs more than a renter’s one, because you’re paying for the ability to rebuild it in addition to replacing your personal possessions. If you live in an earthquake or flood zone, you may need supplemental insurance.
4. Closing costs
Prepare the money in the amount of 2%-4% of your mortgage balance. Some buyers can get lucky negotiate for a contribution for these costs with the seller, but be prepared nevertheless.
5. Utility bills
Your costs for water, gas, and electricity could be higher once you move into your home, depending on where you live now. If you’re moving to a home from an apartment for the first time, know that the increase in square footage can make your utility bill much higher. Make some energy conserving adaptations, such as better insulation and fluorescent light bulbs. Also, remember the phone, cable and Internet bill (and perhaps garbage collection).
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6. Moving costs
You’re about to move, so you’ll need to pay to rent a truck or a moving company to transfer your possessions, and you may also need to make deposits in order to start your utilities.
7. Condo and HOA fees
In case you purchase a home within a condominium association or a homeowners’ association, you will be required to pay a quarterly or a monthly fee. These fees can happen to rise, or the association may have to charge you for projects like roof repair or repaving the parking.
8. Decorative items and furniture
Most people who move to a larger home from a small apartment need to buy some new furniture. You don’t have to buy them immediately, but wait a year or two to keep these expenses in check, so you could compare prices before any big purchases.
Unexpected repairs like paying for mold mitigation in a damp basement, removing a dead or overgrown tree, fixing loose tiles in the shower, or repairing/replacing the room is the most costly part of homeownership. There is no end to the list of possibilities, so the best thing to do is to build an emergency fund. It is suggested to budget for 1%-2% of your mortgage balance as a yearly repair and maintenance fund. However, the amount of money you save depends on the size, condition, and age of your home.
Under maintenance, you can include things like cleaning your gutters, changing your furnace filters, running a yearly home appliance maintenance. You can do these things yourself, but would probably need to hire a contractor the keep your air conditioning and heating system in perfect shape and to inspect and clean your chimney. Remember that interior home maintenance costs money and time.
11. Lawn care
Whether you hire a professional or like to hand the yard work yourself, you’ll have to pay some money in order to keep your yard in check. You need lawn equipment, which can be costly, but if your estate is a bit larger, then you’ll need to throw in a leaf and a snow blower.
The investment in new property can be worthwhile as long as you purchase a property you can really afford, budget for unexpected and expected expenses, and hold onto it for at least 7-10 years
Raul Harman’s is a business consultant from Sydney, Australia. He has masters degree in finance and banking and is currently doing financial consulting for various tech companies. Lately, Raul has been mostly concentrated on start-ups and helping them seek the resources to build their company. Raul is a passionate runner and adventure seeker. Every spare moment he loves to spend in nature. Currently writer for Technivorz, and BizzMarkBlog