Purchasing and owning a home is a massive accomplishment. Being a homeowner has many advantages over renting and helps you to build wealth over your lifetime. While a mortgage payment can end up being cheaper than rent, you need to think about the other expenses that are included in home ownership. There can be some hidden and ongoing costs of owning a home that you should know about before going home shopping. Continue reading to learn about homeowner expenses to include in your budget.
Each year you will have to pay property taxes for your home. The price of your property taxes is fully dependent on where you live. Your property tax bill can range from a couple hundred dollars to several thousand dollars. With your mortgage, your property taxes are typically paid in monthly payments to your lender. Your lender will then put the money you put towards your property taxes into escrow and pay your entire property tax bill for your before the due date.
Homeowners insurance is typically required by your mortgage lender. A homeowners insurance policy will be able to take care of you in case a disaster damages your house. There are certain things that a regular homeowners insurance policy won’t cover, such as floods and wind damage. If you live in an area that is susceptible to certain natural disasters, look into adding on to your plan coverage for these events.
When you purchase a home with less than 20% down, your lender may require you to get private mortgage insurance. This private mortgage insurance expense would be added into your monthly mortgage payment. The amount that your private mortgage insurance will cost you can vary depending on the type of mortgage you have and the amount of money you put as a down payment.
Closing costs typically include lender’s fees for origination, processing, and underwriting of the loan, appraisal fees, title insurance, document prep fees, credit check fees, and more. The expense of closing costs can range from 1-3% of the purchase price but can vary based on your home, location, and other factors. The costs will occur before purchasing your home while you’re in the closing process and typically need to be paid out of pocket.
If you purchase a home in a neighborhood, you will probably have to pay a homeowners association fee. The cost of your HOA fees fully depends on your location and what your neighborhood offers. A few offerings could be pools, golf courses, a clubhouse, landscaping, etc.
Unfortunately, at some point, your home will need maintenance and repairs. When you’re renting, maintenance costs are normally your landlord’s responsibility. However, as a homeowner, you are the landlord now. These maintenance costs can range from an air filter change to A/C unit replacement. A rule of thumb is to estimate expenses to be about 1% of your home’s value per year. This can definitely vary from year to year and depends on the age of your home.
If you are considering buying a home and want to make sure it fits within your household budget, contact us at Lifebridge Financial Group. We will be able to assist you in building a home buying budget that works for you. Give us a call today to get started.