Hidden Expenses of Home Ownership

Buying your own home is an exciting experience. Maybe you’re setting off on your own for the first time or maybe you’ve decided to take the plunge of owning your own home because of the current low historic interest rates. Either way, it can be a bit scary to navigate the process for the first time (and quite honestly the second and third time too!). There are so many things you need to consider when purchasing a home and being a homeowner brings expenses that you didn’t have when you were renting. Here are some things for you to think about as you work through the home buying process:

Closing Costs
When you purchase a home, you will be paying closing costs. These costs can be quite substantial and may come as a surprise! They range from title fees, to application fees, to filing fees and a host of other fees. Sometimes you can negotiate that the seller pays these fees, or at least a portion of them. The title company should provide you with a list of fees before the closing so you can review them all. Make sure you find out what all the fees are (and that you understand what they are) before your closing to avoid last minute surprises.

Initial Move In Expenses
You may need to purchase appliances like a washer/dryer, refrigerator or an oven depending on what’s in your purchase contract. In addition you may need to buy window coverings or window blinds which can be a considerable expense depending on how many and what type you’ll need to purchase. Also you need to take into account your moving expenses. Unless you have a large truck or van big enough to move all your possessions, you may need to rent a truck or hire a moving company.

Home Maintenance
With home ownership comes homes maintenance. Being a home owner means you need to make repairs to your property when they are needed. Appliances will need to be repaired and plumbing leaks happen. Roofs usually need to be replaced every 15 to 20 years. Lawns need to be mowed and landscaped. You can hire someone to do this maintenance for you but that will cost you more. If you plan on handling the yard work yourself, you’ll need to invest in a mower and other lawn maintenance tools.

Don’t underestimate your desire to upgrade stuff in your home too; Plan to spend a lot of time in your local home improvement store. Even DIY type projects can wind up costing you a lot of money.

Property Taxes
Be careful when you are using the mortgage calculators to figure out your monthly payment. Most calculators are only set up to show you the principal and interest amount but not the additional expenses of property taxes and insurance. Once you are a homeowner, you will need to pay property taxes. You can usually find the most recent taxes from the MLS listing and be forewarned that they can go up each year. Most likely, your lender will set up an escrow account and will collect 1/12 of the total amount due each month when you make your mortgage payment. Then, the lender will pay the property taxes out of the escrow account when they are due. It’s good for you to keep up with what your property tax bill is and to verify that it gets paid on time.

Homeowner’s Insurance
Your lender will require that you have insurance on your home. Usually the first year’s fee is collected at the closing and then a monthly amount is collected and held in escrow for the following year’s payment. Just like the property taxes, make sure you keep track of the insurance – how much you are currently paying for it and verify that it gets paid on time. Homeowner’s insurance tends to increase every year too. You may need to purchase hazard insurance if you are in a flood or earthquake zone and those are going to cost you extra.

Homeowner’s Association Dues
These dues are usually paid once per year, if you are in an area that has a homeowner’s association. Be sure you read all the fine print in your purchase contract so you know your financial obligation for these dues.

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One comment

  1. Financial Samurai says:

    The biggest burn is the greedy property tax collectors! Doesn’t matter if the economy is going to hell, they will raise your rate!

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