When you decide to buy a home, many people only pay attention to the asking price of the house and then, they make a mental note of how much they’ll budget on maintenance costs. However, in my experience and interaction with other homeowners, your estimated home maintenance costs will almost always be unbelievably lower than what you’ll actually spend to keep the home in top shape.
You’ll need to maintain the lawn – it costs money. Maybe not as much as the Mar-a-Lago, but it’s still an expense that your budget should account for. Your neighborhood might be at risk of frequent power outages – a backup generator costs money. Big repairs (and small repairs) also cost money. And now, you gotta fix the flooded toilet because you are the landlord. This piece looks at five interesting costs of homeownership you should know before you buy a home.
- Mortgage payments
The first (probably the biggest) cost of homeownership that you need to understand before you buy a home is the mortgage cost. You need to have a clear understanding of how much you’ll be paying in monthly mortgage payments (including interest). Hence, buying a home $50,000 beyond your budget might be easy with a down payment but it might be harder to manage the mortgage payments. You should also familiarize yourself with up to date mortgage information in order to make an informed financial decision on your mortgage.
- Property taxes
Many people decide to buy a home because they figured the amount they pay as rent could be applied as mortgage payments in a home they OWN. However, many people forget that homeowners need to pay property taxes in addition to the mortgage payments. Hence, before you convert your rent to the mortgage payment, you might want to find out how much you are likely to pay in property taxes. Adding property taxes (and potential increases in property taxes) to your mortgage payments will help you how much of a home you can actually afford to buy based on your income and your expenses.
- Home Insurance
Most renters don’t need to worry about home insurance (a few could have renters insurance)— home insurance is the business of the landlord. However, when you buy your home, you’ll need to think about how much you’ll need to spend on home insurance. If you bought a cheaper older house, you’ll pay more in insurance because old plumbing, heating, and wiring could pose more dangers. Interestingly, there’s no one-size-fits-all solution to home insurance because insurance firms can raise your insurance premiums if they have reason to worry about your “risk” level or creditworthiness.
- Making it YOUR home
Many people think they’ve fallen in love with a house during the first driveby or inspection. However, when you move in, you’ll discover that the house doesn’t quite feel like your home yet. So, you’ll need to spend some money to make the home YOUR home. A new coat of paint, shutters, flower boxes and paved walkways costs money. You may also want to add extra rooms, a patio, decks, or upgrade the kitchen.
- Unexpected maintenance
When you thought you’ve tightened up all the loose ends in the cost of ownership, you can expect a dozen other maintenance issues to come up, because of Murphy’s Law. You may need to fix plumbing leaks, restrain the floor, repair cracks in the siding, repair the roof, and eventually replace the roof. You’ll also have to deal with other unexpected preventive maintenance needs that contractors discover when on call to fix something else entirely.