Buying a home means more than paying the sales price for the home. Once you buy the home, it’s yours and so are all of the costs that come along with it. Suddenly you have many more bills than the mortgage. What are the top costs of owning a home?
Keep reading to find out.
The largest expense you’ll likely experience as a homeowner is the real estate taxes. The amount differs by location, but they typically cost thousands of dollars per year. If you don’t set up an escrow account with your mortgage, you’re responsible for paying the taxes on time. This could mean coming up with a few thousand dollars twice a year, depending on when your county collects taxes.
If you do set up an escrow account for your taxes, you’ll pay 1/12th of the amount due monthly. This helps you automatically save for the taxes. You also don’t have to worry about paying the bill – your mortgage company does it for you as they set your escrow payments aside. If you don’t have an escrow account, it’s a good idea to create your own account and put away 1/12th of the amount monthly.
On average, maintenance costs 1% of the home’s value per year. This is a good estimate, but it could obviously cost more or less depending on the age of the home. A $300,000 home, for example, may have as much as $3,000 or more in maintenance costs.
Things like roof leaks, plumbing issues, and blown out furnaces can put a dent in your budget when you least expect it. Rather than leave it to chance, set aside an emergency fund with at least as much as 1% of your home’s value to help you cover the cost of such emergencies.
As a renter, your utilities were probably included in your rent. Now that you own a home, you are responsible for the costs including:
The amount varies by location, home size, and use, but the costs can easily add up. If you took on a mortgage that is around the same amount as your rent, you’ll find yourself paying a lot more for other costs, such as utilities.
Once you move into your empty home, chances are that you’ll want to fill it up quickly. Furniture, appliances, and home décor suddenly become of utmost importance. While you probably shouldn’t fill up your home all at once, the costs add up tremendously, especially if you have a large home and not much furniture to fill it with.
Homeowners have the luxury of handling their own landscaping. That could be a good or bad thing, depending on how you look at it. Landscaping doesn’t come cheap! Once you install it, you also have to maintain it. If you don’t have the time to do it yourself, you may need to pay a service to come out weekly and care for your landscaping for you.
Don’t forget about the homeowner’s insurance. If you have a mortgage, you are required to carry insurance year-round. If you let your policy lapse, the mortgage company will force place a policy on you. You don’t want that to happen. Not only is the coverage less than optimal (it basically protects the lender’s interest), it’s typically much more expensive than a policy you could get on your own.
Owning a home comes with its expenses. Don’t focus on the mortgage alone. Think about how much the other monthly and periodic expenses will cost you. Are you comfortable with the costs? Is it a lot more than you’re used to paying in rent? Think about the purchase long and hard before making it – it’s likely one of the largest investments you’ll make in your lifetime.