Homeownership is often viewed as a significant step in one’s financial journey. But many rush into the purchase of a home without considering the full cost of owning a property. There are expenses beyond a monthly mortgage payment. And if an individual or couple are not prepared for these additional expenses, they will find themselves surprised, and, potentially, house poor.
Let’s consider a few of these potentially surprising costs of homeownership:
1. Closing costs
The surprising costs of owning a home begin when you close on the home. Closing costs can include title insurance, recording fees, legal fees, property taxes, and mortgage insurance. These expenses can run anywhere between 2% to 5% of your mortgage. Your bank should give you an estimate of the closing costs involved prior to the loan closing.
2. Property taxes
The government always wants a slice of the pie. Even if you are mortgage-free, you are still required to pay property taxes. You can find the amount by viewing the MLS (multiple listing service) listing. Taxes are usually paid monthly in addition to your mortgage payment.
Not only is it wise to insure your home, your mortgage holder requires you to do so. And just like any other type of insurance, there is a premium you must pay. Shop around to get the best price, but don’t skimp on homeowners insurance. Homeowners insurance is an expense you want to pay.
4. HOA fees
Some neighborhoods have common grounds or structures that must be maintained. Homeowners associations pool the fees of those in the neighborhood to cover those expenses. Make sure to know what HOA fees your future neighborhood require prior to making the purchase.
5. Exterior maintenance
Homes do not take care of themselves. Left on its own, the home will fall apart. From mowing the grass to replacing the roof, exterior maintenance is essential to keep the home in good condition. And these items cost money.
6. Interior maintenance
After a while, the paint will fade, and the appliances will break. Especially if you have kids, the interior of a home can quickly become “loved.” The cost for interior maintenance can get pricey. And it will be up to you cover the costs.
Be sure to consider all the costs involved in owning a house before you sign the final documents.
If you have rented for a while, your monthly rent payment may have covered utilities. For homeowners, this expense takes place in addition to the monthly mortgage payment. So, don’t be surprised when you get hit with your monthly electric, water, and gas bills.
8. Additional services
There will be other services you may desire for your home, like pest control. These additional services can add up quickly.
Do you want a new deck or an updated bathroom? Watching home improvement shows can make it seem like these are insignificant improvements. They are not, especially if you decide to hire out a company to do the improvements.
One of the biggest surprises for new homeowners is the amount of time they spend maintaining their home. This is a different type of cost, but, nonetheless, one that is felt. It can make some homeowners long for the days when they could simply rely on their landlord to maintain the property.
Homeownership is a big step. Don’t become house poor. Be sure to consider all the costs involved in owning a house before you sign the final documents.