In the current housing market, people can afford bigger homes than a few years ago. But, just because you may be able to buy your piece of luxury real estate in La Jolla, that doesn’t necessarily mean you can afford to own it. While home prices have been dropping steadily, other costs associated with maintenance and upkeep for a home haven’t. Here are some factors to consider when deciding just how much house you can afford.
A bigger home means higher property taxes. Property taxes are generally calculated by dividing the total amount of taxes needed by the local government by your home’s total value. So even though your new home’s value is comparable to your old one, your share of the tax could be higher as property values may have dropped in the area. As the recession continues, local governments across the country have had to raise local property taxes to recover from budget shortfalls in other areas.
Home insurance can vary widely from state to state and town to town, but, generally speaking, they are calculated based on a homes square footage. Hence, moving into a bigger home could raise the insurance cost.
Owning a larger home also means it will cost more to maintain it. Experts recommend you factor in 1.5% to 4% of your home’s value toward maintenance costs when budgeting. Other costs associated with home ownership, such as repairing a roof or replacing ductwork, furnaces, etc. have gone up. The Bureau of Labor Statistics estimates the costs for homeowners have risen 2.4% in 2008. So pay special attention to these factors when budgeting to maintain a healthy financial outlook for many years to come.
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