The Hidden Costs of Homeownership
Are you tired of watching your rent increase every year? Homeownership can be a great option to consider. However, it is important to begin the homeownership process with an accurate idea of the true costs related to homeownership. There is more to budget for than a monthly mortgage payment, and you wouldn’t want to be surprised later on down the road. Here is an overview of some expenses that oftentimes come as a surprise to new homeowners.
Appraisal and Inspection Fees
Home inspections and appraisals are always required before you can purchase a home. This reveals any repairs that need to be done, pest issues, or chemical hazards and prevents buyers from overpaying too much.
Homeowners have to pay property taxes, which is oftentimes set up with an escrow account at closing that is paid into each month. Even if your home loan has a fixed rate, your property taxes can increase, so being prepared for that possibility is a good idea.
Lenders will require homeowners insurance throughout the lifetime of your loan, and the cost involved will depend on your home’s location, construction materials, and more. If you are used to paying renter’s insurance, don’t be surprised to discover that homeowners insurance is much higher, because homeowners insurance is meant to cover the costs of rebuilding the home if necessary as well as replacing any possessions. Additional insurance might also be required if you live in a special hazard zone like a flood zone or earthquake zone.
Buyers should always be prepared to pay anyway between 2% and 4% of the loan amount in closing costs. This will vary depending on which area you are in, and these costs can also be negotiated with the seller.
You will either have to rent a truck or pay a moving company to transport your belongings to your new home. You also might need to make a few deposits in order to start your home’s utilities.
Where your new home is located could adjust the costs for your water, gas, and electricity. Paying a phone bill as well as a garbage collection company, internet provider, and cable company are common expenses involved with homeownership.
Condo and HOA Fees
If your home is part of a condominium association or homeowners association, there are monthly (and sometimes quarterly) fees. Sometimes these will increase unexpectedly if the HOA is repaving a parking lot or making community repairs.
General Interior Maintenance
This can include anything from cleaning your gutters, changing filters, inspecting your chimney, and maintaining your air conditioning and heating units. Some you might be able to do on your own, but other you might have to hire a contractor for.
Lawn and Landscaping
Equipment to properly take care of a larger property can be pricey, but so is hiring a landscaper to do the work for you.
While furniture expenses are normally determined by the buyer’s spending habits, if they happen to be moving from a small apartment to a home, there will be a few new furniture necessities. This can be minimized if the buyer doesn’t make all the bigger furniture expenses directly after closing on the new home. Spreading out each new furniture purchase and comparing prices beforehand will be easier on the budget.
Fixing tiles, repairing the roof, removing dead trees, or getting rid of mold in the basement are only some of the unexpected expenses that can come up for homeowners. The list of these unexpected scenarios is endless, but the amount you should have prepared in savings really depends on the size, condition, and age of your home.