Owning a house is more than just paying a monthly mortgage. There are other costs involved once you move into a home and it is important that you familiarize yourself with these first before you settle into your new abode, else you’ll be in for a surprise that could ruin your future finances.
The following are the other costs of homeownership that you should factor into your budget, aside from your monthly loan payments:
Insurance
A homeowner’s insuranceis a financial security meant to protect you from financial stress that comes with unexpected events such as a flood or a fire. Typically, a homeowner’s insurance today costs about $1,000 to $1,500 on average per year.
These costs vary depending on the size of your home, its age, type, and location. Some areas, for example, are more prone to natural disasters such as hurricanes and earthquakes, and are therefore riskier and can entail a more expensive premium. Old homes also cost more to insure.
Your lender may require you to show proof of your homeowner’s insurance when you apply for a mortgage. This is because the security of the mortgage is based on the home itself and if the home is damaged, the mortgage will be left with a home of lesser value. Having insurance protects not just you but also the lender and their investment.
Property taxes
According to the US Census Bureau, the average American household pays a median of $2,127 on property taxes annually. Property taxes – both state and county or city taxes – are unavoidable costs of homeownership. However, this number is only the computed average and there are other parts of the country where you might have to pay a higher property tax. Before you consider where to buy a home, always keep the cost of property taxes in mind.
Utilities
Paying for utilities when you’re renting cannot be compared to when you’re paying utilities as a homeowner. Water, electricity, heating and air conditioning can seriously add up and cost you about $2,000 to $4,000 on average a year. Costs vary depending on the number of appliances you own, the size of your family, and may fluctuate between the seasons.
Appliances and Furniture
You cannot always expect the last owner of the house to leave every piece of their furniture and appliances so be ready to fill up. Most major appliances usually come with the purchase but not the furniture. Clarify this information with your agent so you can shop beforehand prior to moving in.
Pest control
Sneaky pests can cause serious damage when they infest so investing in preventive care is only wise. Reparations could be more expensive and not to mention hassle, later. You may spend around a thousand dollars on installation and eradication including monitoring. The average one-time cost, however, is around $300 to $500 depending on the size of the home area being treated and the services included in the package.
Repair and maintenance
Costs for repair and maintenance may differ depending on whether you do them on your own or when you hire a contractor or a professional to do the work.
It is a popular rule of thumb to allocate around one percent of your home’s purchase price for maintenance on a yearly basis. This means if you bought your home for $250,000, you need a budget of $2,500 annually for ongoing maintenance.
This includes inspection and changing of HVAC filters, cleaning of range hood filters and kitchen sink disposal, testing of gas detectors, deep house cleaning, vacuuming fridge coils, cleaning the gutters, air conditioning, inspecting for leaks, and painting jobs, among others.
Yard care
Trimming, gardening, and landscaping expenses could add up from $300 to $1,000 on average depending on the kinds of services you get and whether you go DIY or hire a professional. Yard care services include mowing, fertilizing, watering, aerating, dethatching, and overseeding.
Before you jump into the decision of getting a home, look at the overall picture first and evaluate whether you will be able to manage the real cost it entails. Using a savings account to allocate money for homeownership separately is a good way to manage your expenses, rather than relying on your credit cards and risk overspending.
