Homeownership is the American dream. But, did you know that there are many hidden costs of homeownership? Owning your home is a valuable financial asset and paves the way for a more secure future. However, things like property taxes, insurance, HOAs, maintenance, and utility costs add up. We will discuss the less obvious costs of owning your home. By knowing costs upfront, you will be better prepared to enjoy your home even more!
Whether you have already closed on your new home or sorting out your finances purchase, it is important to educate yourself and learn all the possible and often overlooked expenses of owning a home. We’ll go over some of the hidden costs so you are better prepared to deal with them when they come up in the future.
As a homeowner, you need to pay property tax. This is a quarterly or monthly fee to the municipality or town in which you reside. You may have expected to pay property tax. But what you might not realize is how expensive these taxes can be. So before you finalize a deal, you need to consult your realtor. Find out about the house taxes of the area in advance.
Your property tax is usually available on MLS listings. Once you have an idea, divide the number by 12, so you can add it to your estimated monthly expenses. Bear in mind that these taxes may increase every year, so assess your finances accordingly. Be prepared if and when this happens. If the tax amount falls well within your budget, only then should you move forward with the purchase.
Insuring a house is way more expensive than a rental policy for an apartment. Homeowner’s insurance covers the dwelling. It is not just for the interior which makes it more costly than renters’ insurance. You should be prepared that your insurance will be much more expensive than your renter’s insurance. Additionally, if you live in an earthquake zone or flood zone you will have to pay extra for disaster risk insurance.
There are several other factors to consider about home owner’s insurance. People sometimes make the mistake of choosing an old home thinking it would help save money, but the reality is that an older home costs more to insure. This is because the electric system, heating, and plumbing can be older and thus more prone to damage. You will also need to ensure you have good credit. Insurance companies may periodically check it and increase the rates based on their assessment and your credit score.
Homeowners Association & Condo Fees
If you buy a residence within a condo or a homeowners’ association, there may be quarterly or monthly fees due. This is a charge to use and maintain the shared facilities and public areas such as pool, community clubhouse, playgrounds, garbage collection, landscaping, etc. These fees can rise. The association may need to charge a special assessment for projects like installing a new security system, revamping common areas, or repaving the parking lot. This may cost you several hundreds of dollars per month. So, you need to be sure beforehand whether you want the services provided by the association. If so, can you afford the charges in the long term?
The moment you purchase a new house, the next step is to decorate and furnish it. You would want your place to reflect your style and taste, especially when you have guests over. The budget for setting up the interior or exterior of a house knows no bounds. You’ll find yourself paying attention to things that you may have never had thought of in apartment living. Things like shutters, walkways, landscaping, patios, and more are things you didn’t deal with in an apartment. It is important to not get carried away and buy too many new things. Create a budget for decor and furnishings. Then stick to it, so that the expenses don’t add up faster than you realize.
We are all well aware of how detrimental heavy repairs are to our budget. So stop ignoring or delaying a small repair until it becomes severe. Avoiding these projects may cause more damage and harm. Its repair will also be heavier on the pocket. One should maintain both the exterior and interior of your home. This includes fixing plumbing leaks, cleaning gutters, resealing the driveway, repairing the appliances, sealing windows and doors, draining the water heater, and repairing or eventually replacing the roof. You should be mentally prepared and financially stable. That way, you can bear all these costs, whether they are expected or not.
You can consider a reliable home warranty service. It covers repair and replacement costs for your home’s appliances and systems when they are damaged from routine use. This way you are protected from unexpected costs.
Few things in life can compare to the joy you receive when you get the keys to your new home, but this joy can turn into frustration and panic if you aren’t prepared. Now you have a better grip on the multifaceted and often unexpected hidden cost of homeownership. You understand what to expect and can take action on finding out what these costs will look like against your budget.