What is the true cost of owning a home?
Cost of Owning a Home | As a homeowner, it will be important to budget for your ownership costs. Here is a list of some of the most common expenses for you to keep in mind and start developing your budget.
Most people who are considering buying a house know that it starts with:
Either you are paying cash or you are getting a mortgage. If you are applying for a mortgage, you will soon find out:
- How much downpayment do you need?
- How much will the monthly mortgage payment be?
- What interest rate will you qualify for?
Then you will start shopping for home insurance. Make sure you shop around and get a few quotes. I would consider adding sewer back up insurance and water pipe insurance. You are responsible for the water and sewer lines from where the county comes to your lot all the way to your house. You may need to add flood insurance, depending on whether or not you are in a designated floor zone. In addition, you will be paying annual property taxes. Your loan may include PMI/Private mortgage insurance, which protects a lender if you stop making your payments on your loan. PMI is required for conventional loans where the downpayment is less than 20%.
Moving and Storage Costs
Price out moving companies, boxes, tape, and labor. If you have special items, you will want to get estimates, e.g. grand piano.
New Reoccurring Home Costs
Once you own your house you will be paying new utility costs and property maintenance expenses. If you can, get rough utility numbers from the sellers to add to your house budget costs. Remember the way you use the home will be different from them so these costs will vary. After a year in the home, this number will be more dependable.
- Are you going to buy equipment like lawnmowers, or are you going to hire landscaping or mowing services?
- Are you going to maintain your own lawn, or are you going to hire someone else to fertilize, reseed, and maintain the grass?
- Are you going to manage your own pest control or are you going to hire a company like Terminix for quarterly treatment or termite prevention?
- Are you going to clean the gutters yourself, or are you going to hire someone to do this?
- HVAC filters: $10-20/filter monthly to quarterly depending on your system, allergies, pets, etc
- HVAC tuneups start of summer and winter season, $65-125/tune up
- Garden houses, mulch, plants, outdoor furniture
- Storage for landscaping and other supplies
- Cleaning, power washing
- Fence repair and maintenance
- Drainage maintenance or management
Keep a cushion for unexpected repairs
Save for future furnace, water heater, roof replacement
Budget for any immediate cosmetic updates or repairs that you need or want to do
A lot of these costs apply to a detached home. You may be part of an HOA or Condo association. See what costs they cover and what could be additional. And for those with association fees, budget for increasing condo or HOA fees. Expect condo association fees to increase by 5% a year as a rough guide. Keep track of the increases to help you budget better in future years.
Forecasting and Planning
In the first year of your home ownership, keep track of your expenses. What did you have to pay for and when? how much? Once you have lived in your house for a year, you can better plan for and track of the costs on a monthly and yearly basis and use it for forecasting purposes. This will help you maintain your home and plan for future expenses. Taking care of the regular maintenance is one of the most important ways to protect your home’s value.