Buying a home is a great step to building wealth. Homeowners build wealth much more quickly, a recent report, November 2024 from the Aspen Institute's Financial Security Program said it was huge. A renters median net worth was $10,000, a homeowner's is $400,000.
But, when buying a home there are some hidden costs of ownership to take into account so you are prepared.
1) Buying a home with a home owners or condo association will have a monthly fee towards maintenance costs and often these have an equity requirement of an up front fee, sometimes as much as six times the monthly cost paid at closing. Some also have move in fees as well.
2) Maintenance, even if you are within a development with a home owners association there will be ongoing maintenance that many renters neglect to think about being used to calling the landlord to fix anything that breaks. Usually, you want to budget something like 5% of the cost of the mortgage towards building an emergency fund to use for maintenance emergencies. One way to offset these is to take out a home warranty, like insurance this does not remove the total cost of repairs, but will lower the cost. It is basically a form of insurance where you pay a deductible rather than the cost of fixing the appliance. Some home warranty companies are better than others. Often these companies will fix an item multiple times before replacing it, even though it might be better to replace at once. Also, generally you do not get to choose the people who work on your appliances, they are chosen by the home warranty company.
The benefit of a home inspection when buying a home is to not just find out what might be broken, but to develop a maintenance plan, so you have an idea of what is going to need replacing and when and can budget for those items ahead of time.
3) General Repairs are something that always seem to happen at the worst time, on a holiday or when funds are low. This is another reason for developing an emergency fund for home repairs when they arise.
4) Utility costs may also be something you are not used to paying if a landlord has included them in the rent. But these include, cable, internet service, electricity, natural or propane gas, heating oil, water and sewer costs. These can be monthly or quarterly costs depending on the service.
5) Insurance costs are much higher when you own a home over renting a home where you are simply covering your own things and not the property itself. However, insuring a home and a car together can save you money as I am sure you have seen the adverts where bundling can save you money. It is always worth getting a yearly estimate from other insurers as prices can fluctuate and you may be able to save a significant sum over your current policy cost.
Whilst, these costs may seem large, the benefits of wealth building over time far outweigh the costs as the report cited at the start of the article makes clear.
So, if you are interested in looking for a home along the Main Line or in Chester County contact Nick Vandekar, Realty One Group Advocates, Selling the Main Line and Chester County, office 484-237-2055, cell or text 610-203-4543, or email Nick@VandekarTeam.com to arrange an appointment to discuss your needs and how I can help you find the right home and give you the confidence to make the right decisions throughout the transaction.
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