5 Hidden Costs of Home Ownership You Didn’t Know About
Purchasing your first home is an exciting step in your life. First-time homeowners often create a budget based on their downpayment and monthly payments on their home. However, many new homeowners rarely take into account the hidden costs of owning a house. The average homeowner spends an additional $9,000 on home owning expenses. While some of these costs may not exactly be “hidden”, they are often overlooked. Here are five expenses you may want to consider before you buy your first home:
Taxes- Taxes for a home will vary according to several factors such as the home’s value and location. Property taxes are set by local governments. Before purchasing your home be sure to use a property tax calculator to factor in the actual monthly amount you will be spending. Often new owners overlook how property taxes will affect them in the long run. Your property tax will likely increase over the years especially if the value of your home increases. Making sure you are prepared for that increase in the future will help you adjust your budget in the future.
Closing Costs- Closing costs of buying a home are paid at the end of the process and are the step before you get the keys to your new home. This is often two to five percent of the cost of the home. So, if your home is about $300,000, your closing cost could range between $6,000 to $15,000. Some buyers opt to roll the closing costs on to the loan, but others choose to pay it along with the down payment. Opting to roll the closing costs on to the loan does make some people uneasy with the increase of the amount. Paying the full closing costs could help you pay more over time. Some choose to pay this off using a short-term loan such as a car title loan. It is important to understand how a title loan works before you apply. A title loan allows you to use your car as collateral in exchange for fast cash. The amount of money you can apply for, is based on the value of your car. You are then able to receive cash much quicker than other loans in order to pay off the closing costs. This might be a good option if you know you have the flexibility to pay back the loan in the near future.
Insurance- Another often overlooked cost of homeownership is home insurance. New homeowners tend to underestimate the cost of homeowners insurance. The cost of home insurance is another factor like property taxes that are factored into the overall cost of your home and allocated into your monthly payments. The amount you pay for home insurance will differ depending on the value of your home, age of your home, and location. Insurance will usually cover theft, fires, and storm damage. However, if you live in areas that are prone to other natural disasters such as earthquakes or floods, you may be able to purchase additional policies that cover those kind of risks.
Maintenance and repairs- Now that you have paid all the costs of your home such as closing costs, insurance, and are beginning your monthly payments, you now have to consider the cost of any maintenance or repairs your new home needs. The average cost of repairs and maintenance to a home each year is usually about one to four percent of its purchase price. This means that a $300,000 home can cost up to $12,000 in maintenance and repairs. This might seem like a huge amount to pay every year, but this cost will range depending on the home and unexpected repairs that might come up. These expenses can range from emergency situations such as buying a new air conditioning unit or continual maintenance such as your lawn.
Lawn- Lawn maintenance is probably one of the most costly parts of homeownership. Whether you choose to hire someone to maintain your lawn or do it yourself, the costs still add up. Hiring someone for lawn maintenance can cost about $100 a month. You may choose to do this yourself, but the costs of supplies and time will have you spending around the same amount as hiring someone. Some homeowners choose to update their lawns to more water friendly and low maintenance options such as replacing grass with stones, gravel, or sand. However, the initial repair of this will cost a pretty penny as well and will still need some sort of care.
Homeownership can be a fulfilling and exciting purchase. However, it is also a very costly expense that can often lead to spending more than you expect. Building a savings and considering how much you can afford to realistically fit your lifestyle is important to think about before your first purchase. While shopping around for your first home, remember to consider not just the initial costs of buying a home but also the future costs that will add up.