There are many benefits that come along with being homeowner. The problem is, there are also many costs that homeowners-to-be don’t think of before buying.
If you’re getting ready to purchase a house or considering it in the near future don’t forget these hidden costs of homeownership.
# 1 – Closing Costs
If you’re a first time home buyer closing costs might come as quite a shock to you. I know when I bought my first home I was blown away by how much money I had to come up with on top of my already high down payment.
Closing costs are the expenses that are associated with getting a mortgage. They include things like origination fees, inspections, and appraisals. These costs can add up to a whopping 2-5% of the purchase price of your home.
Unfortunately closings costs are unavoidable if you’re a getting mortgage and aren’t something you’re going to recoup as a homeowner.
# 2 – Property Tax and Homeowner’s Insurance
If you’ve been tinkering around with different home prices trying to figure out how much or how little you want to spend, be sure to factor in the costs of property tax and homeowner’s insurance.
These two costs can often be much more than you think.
You can look up property tax information on your county auditor’s site to know exactly what a particular house will cost you. Homeowner’s insurance is a bit more difficult to predict though. It’s a good idea to get a quote from your insurance agent once you have a house in mind to know what you’ll be dealing with.
You should expect homeowner’s insurance and property tax to add at least a couple hundred extra dollars to your monthly mortgage payment.
# 3 – Repairs
As a homeowner you can count on the fact that costly repairs will pop up sooner or later. These repairs can especially add up if you buy a “fixer” with plans on slowly making improvements.
My husband and I bought a fixer last summer and quickly found out that some of the projects that needed done were much more urgent than we had anticipated. Even worse, the biggest project we knew we had to tackle ended up costing twice as much as we planned for.
Repairs are something you don’t have to think of as a renter (other than being annoyed that they need done) but as homeowner making repairs can mean a big hit to your wallet.
# 4 – Renovations
If you’re a person like me, or have a spouse like me, then you’re no stranger to rooms being torn apart and put back together.
One of my favorite things about being a homeowner is also one of the most expensive – I like to redo rooms!
The cost of renovations varies depending on what’s needing done (obviously) but this cost is often overlooked by people who have never owned a home. As a renter you have restrictions on changes you can make to the home you’re in but as a homeowner the rules are up to you. And chances are you’re going to want to make your home into a place you love. (Which costs money.)
# 5 – Furniture
Along the lines of wanting to make your new home suit your tastes, it’s likely that once you get moved in, especially if you’re moving into a larger place, that you’ll want furniture to fill out the house.
While this cost can be kept in check by buying slowing or purchasing used items, the amount you spend on furniture will likely go up when you get a place of your own.
# 6 – Utilities
If you’re moving into a bigger space you’re going to be paying more to keep that space warm. My family and I moved to a house more than twice the size of our former (very small) home and our utility bills have been twice the cost.
Plan Before Your Purchase
Buying a new home is exciting and it’s easy to want to jump in with both feet but it’s best to know what you’re up against first.
Before you buy a home have a thorough inspection to get an idea of repairs that will need done in the future. You should also ask the owners about the costs of utility bills, homeowners insurance and property tax so that you can factor those into your decision.
Lastly, be sure to have a cash buffer (like an emergency fund) before buying just in case something unexpected pops up.