The Hidden Costs of Owning a Home
For many owning a home has always been a part of the American dream. However, owning your own home can be more expensive than we thought. For first-time buyers it wise to buy a house that you can afford, because you are not just going to be making the monthly mortgage payments but you will be paying for the little costs that eventually stack up into very big credit card bills.
Here are some of the few hidden costs to watch out for and budget for:
Property Taxes When you purchase a home you become responsible for paying the property tax. The amount that you will have to pay is readily available from the Assessor’s office or from your Buyer Agent. Taxes often increase as well, which means you'll be paying even more, so make sure to budget that tax money into your monthly payments.
Insurance You will be required to get homeowners insurance by your lender as well as flood insurance if the home is located in a high risk flood area. These are additional monthly costs, associated with your home's location, age and value.
Condo Fees If you buy a condo you will have to pay condo fees every month, however, the condo fees usually cover some of the other monthly expenses that buying a single family home entail such as master insurance, maintenance, etc. But with a condo, the monthly fees are subject to increase and special assessments might be charged for major maintenance work or repairs.
Appearances Unfortunately, the new things in your old house become old things in your old house. Paint peels, driveways crack, water heaters and appliances break. These can be costly and unexpected. Your lawn itself can cost and arm and a leg to upkeep, depending on how large it is; the time and money spent keeping the lawn clean and green amounts to more than you'd think. For most homeowner's one percent of the value of the house goes to maintaining it.
Tools If you don’t have tools you’re going to need to get them now. You will need hand tools to fix and repair broken items in the house. You will need to purchase lawn and yard maintenance tools such as a lawnmower, weed whacker, seed spreaders, shovels and rakes and whatever else you ned to keep the place looking good.
Utilities Unlike when you are renting and some if not all of the utilities are being paid for by your landlord, now you will be responsible for the utilities.
Cleaning From kids to pets to general wear and tear you will find yourself with an army of vacuums, cleaning products and rag bags in no time. When something particularly unpleasant happens to a carpet you may have to rent a carpet cleaner. If you decide to hire a cleaning service that is going to be another way your home costs you money.
Maintenance We all know how detrimental to our budget major repairs are, so instead of predisposing ourselves to the danger of heavy repairs, it’s important to maintain the stability of all areas of the home. Of course, this includes cleaning the gutters, sealing the doors, fixing plumbing leaks, reinforcing the roof, and many more. For most homeowner's one percent of the value of the house goes to maintaining it.
Home Emergencies Sure, you have homeowner's insurance for when (if) the worst happens, but expect your out-of-pocket deductible to be 10 percent of the cost of repairs. If the average disaster costs around $5,000, that's still $500 out of pocket for you that you may, or may not have budgeted for.
So if you want to be part of the American dream, it pays to do the math. Account for maintenance, repairs and "what if" scenarios in advance and make that part of your monthly budgeted payment. Instead of taking out the largest home loan you can afford, take a smaller loan and put your pre-determined "hidden" costs in savings so you are prepared for those unexpected bumps in the road that are bound to happen.
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