Due to COVID-19, mortgage rates are at an all-time low, which means a renewed interest in homeownership. Especially as young people are tired of seeing their rent costs rise every year, the idea of having equity becomes more and more alluring.
There are plenty of benefits that come with owning a home, including building a path to a greater financial future. However, first time home buyers might be shocked at the real costs of homeownership. In addition to mortgage payments, the real cost of owning property involves plenty of hidden expenses. Here we go over which costs are simply financial and which might be a surprise to you. We’ll look at the most common expenses and how to deal with them.
Your Guide To The Costs Of Home Ownership
Though your house is one of the most significant purchases you can make, other ongoing expenses come with homeownership. Things like closing costs, down payments, moving, and more, let’s discuss some of the things you’re most likely to encounter.
Homeowners’ insurance is not an unexpected expense; almost every bank and mortgage company requires that you have insurance before giving you a loan. The premiums will likely be included in your mortgage payment. A lot of times, your homeowner’s insurance premiums will be paid from your escrow account, like your property taxes.
Remember that premiums often rise annually, particularly if you increase your coverage to reflect your property or possessions’ rising value.
Another surprise that home buyers often don’t realize is that most homeowner’s insurance does not cover “acts of God.” You’ll need additional coverage for floods, hurricanes, earthquakes, and even water damage from storms.
All homeowners are required to pay property taxes. The township, city, or country where your home is located will determine the tax rate, not your bank. Property tax is basically a guaranteed perpetuity payment that is made at your expense. Like with any tax, you don’t have a say in how much it will be, but there are strategies to help lower it.
When it comes to your home, water can be its worst enemy. The primary job of your roof is to keep water out. A leaky roof can cause cosmetic damage both inside and out of your house, and it could destroy belongings inside and even damage the integrity of the structure.
Roof damage usually happens when shingles get cracked, blown off, or damaged in some ways. Roofs will inevitably need to be restored or replaced eventually, so make sure you have an inspector look at it closely when you buy – you might be able to negotiate the price if the roof is in bad shape.
The Heating, Ventilation and Air Conditioning (HVAC) System
Your home’s HVAC system is a complex system in your home that controls heat, cooling, and the overall circulation of air throughout the residence. This system should not undergo cheap DIY fixes; you should be prepared to hire an HVAC professional from time to time.
You’ll likely need to buy new units at some point, be it at the time of purchase or later down the road, as these systems do wear out over time. Replace the furnace and AC filters to help keep them running efficiently.
We recommend having your HVAC systems inspected at least once per year. Do some research in your area, as many companies over service or maintenance plans might reduce the cost of an annual inspection and provide other benefits, like lower costs on parts or even reduced pricing on emergency visits.
The Electrical System
Faulty wiring and other electrical issues cause a decent amount of fires in homes every year. As a homeowner or future homeowner, we suggest that you have a basic understanding of how these electrical systems work to keep your home and family safe.
If you’re facing any sort of systemic problem or in the middle of significant remodeling, make sure you call in a trusted and licensed electrician to make sure everything is installed correctly and up to current codes and safety standards.
Another on our list of the costs of homeownership is plumbing issues. Clogged drains and other small plumbing problems will happen from time to time, and they usually aren’t a big deal.
However, some older homes might present larger problems, specifically if they contain galvanized iron water pipes. These pipes become clogged with mineral deposits over time and will gradually reduce the water pressure in your house. The bad news – you can’t repair these; they must be replaced entirely.
Talk to your real estate agent and your home inspector to determine what to expect before you buy.
HOA and Condo Fees
If you buy a property within a condominium associate or a homeowners’ association (HOA), you will be required to pay a monthly or quarterly fee. This fee will include the cost of things that benefit the entire neighborhood, from snow plowing to landscaping, garbage collection, and more.
HOA fees can rise steadily, or your HOA might deem it appropriate to charge extra for individual extra projects to benefit the neighborhood, like adding a new security system, renovating buildings, or even repaving the parking lot. Check with your agent or the association itself to see what these fees will be before you buy.
The Costs of Home Ownership Include Furnishings and Appliances
You might have already thought about this, but it’s likely that your new home will be larger than where you’re currently living and might require some extra furnishing. Plus, some appliances in your home might be considered fixtures and be included in the sale price of your home, like dishwashers or ovens; other appliances are not always included. This means if the seller doesn’t want to include the refrigerator or washer or dryer, you might have to buy new ones.
You should also consider how old your home is. If it’s more than ten years old, the appliances included in the sale price might be on their last leg anyway. Be sure to budget for replacing some of those high dollar items, like your water heater or cooling system.
Cost of Home Ownership Key Takeaways
Typically, when people think about the costs of homeownership, they are only thinking about the mortgage payment. They don’t always consider property taxes, insurance, maintenance fees, and repair costs.
Though homeownership has many perks, there are some unexpected expenses to be aware of, like the ones we mentioned above. Some costs are beyond your control, like property taxes and homeowners association fees. Ensure you’re aware of the costs of homeowners insurance, especially if you live in a natural disaster-prone area.
The most costly part of homeownership relates to your house’s overall upkeep, including repairs and monthly expenses. The experts at 41 Realty Group can help you stay well informed about the average monthly costs of owning a home and help you avoid expensive surprises. We would love to help you budget your expenses and help you buy the home you want.