You might be looking to buy a new house this year since mortgage interest rates are so low and the real estate sector is flourishing.
Perhaps you’ve created a budget to determine the size of your monthly payment. You also reasoned out so many options, and you’ve concluded on your budget. But wait, before you say, “I can afford that,” while looking for a house, have you considered some extra costs?
The less noticeable costs that go beyond a mortgage payment are something that many would-be homeowners fail to factor in. Here are Some hidden costs of house ownership to aid homeowners in budgeting for them.
These may take prospective homeowners and their finances by surprise.
Real Estate Taxes
Property taxes are expenses you’ll need to factor in when purchasing a home. These taxes are often paid monthly, along with your mortgage repayments. You must pay these taxes to your county or municipal taxing body.
The amount of property taxes you’ll pay depends on the estimated value of your house, and it varies from state to state.
Your local public schools, infrastructure development, and municipal and state employee wages are all supported by the money you pay in property taxes.
The local governing body may also utilize the assessed taxes to pay for water and sewer upgrades and other community-beneficial services like libraries, law enforcement, fire prevention, and road and highway building.
The taxation authority has the right to place a lien on a piece of property when property taxes are not paid. Before buying any property, buyers should always do a thorough analysis of any existing liens.
You must find a way to transport your belongings to your new home, right? There is a price for that.
Many folks neglect to budget for this expenditure. You may use a rented truck to relocate yourself or hire movers. Depending on how far you’re moving, your fees may change.
The average cost of hiring professional movers may be less than $1,500, depending on the size of the rental truck, the amount of belongings being moved, the distance being traveled, and the time of the year.
Closing expenses and down payments are two very different things. A down payment is a buyer’s initial up-front payment.
This closing expense may account for 3% to 6% of the buying price. Insurance, inspection, broker fees, and interest are just a few of the expenditures that go into a home’s closing, but closing costs include all these expenses.
Early planning can help you avoid using all your emergency fund or down payment to cover closing fees. Your actual closing costs will vary depending on several variables, including the type of mortgage and the location of your future house.
Working with a real estate expert might be quite advantageous because there are varying regulations based on your city or state. With a bit of haggling or comparison shopping, you may be able to lower your closing fees.
The buyer will be responsible for most closing charges, although the seller also pays fees. The commission paid to real estate brokers, typically 5 to 6% of the transaction price, is the highest expense for the seller.
Condo fees and HOA dues
There will be a monthly or quarterly charge if you purchase a house within the homeowners’ association (HOA) or condominium organization. Not all homeowners belong to an HOA. These associations often operate in condominiums or communities that identify themselves by a specific region.
This fee often covers expenses for neighborhood-wide services like trash pickup and snow removal. The HOA may also utilize the money for floor upkeep, community amenities, and lawn and garden maintenance.
Make sure you account for this expense in your affordability budget because it is distinct from your mortgage and property taxes.
For tasks like repaving the parking lot, setting up a new security system, or renovating common facilities or buildings, your organization may need to impose a special levy or increase HOA dues.
Homeowner’s Insurance (HOI)
Your lender will most likely need homeowners insurance if you have a mortgage on your house. In the case of a devastating incident, such as a fire, a homeowners insurance policy protects the structure of your house and your possessions.
For those who purchase their home outright, you may also consider taking home insurance.
Also, knowing what your homeowner’s insurance excludes is crucial. For instance, these plans frequently do not cover losses caused by floods, earthquake damage, or theft.
You can decide whether to include additional policies to your property after knowing what is and isn’t covered by your homeowner’s insurance.
Unfortunately, this additional insurance can be expensive if you reside in a flood area. As of 2021, the average price of flood insurance was $708 per year; however, charges might differ significantly depending on how far away your home is from the shore.
Mortgage Insurance (PMI or MIP)
Mortgage Insurance (PMI or MIP) PMI is private mortgage insurance required for traditional loans when a borrower does not put down the 20% minimum required by the lender.
With every loan supported by the Federal Housing Authority (FHA), a mortgage insurance premium (MIP) is needed.
Both MIP and PMI shield the lender from the possibility of a borrower default. PMI or MIP can add $100 to $200 monthly to your mortgage payment for a property worth $250,000.
The HVAC System (Heating, Ventilation, and Air conditioning)
As the current HVAC system ages, you’ll undoubtedly need to acquire new ones. Frequent filter replacements keep the furnace and air conditioner operating at peak performance. At least once a year, homeowners should evaluate their HVAC systems.
Numerous businesses sell service or maintenance plans, which may minimize the price of an annual inspection, give semi-annual inspections, and offer other advantages like lower part pricing and less expensive emergency visits.
Regardless of where you live, you periodically run into minor plumbing issues like clogged drains, and they aren’t challenging to remedy if you have a basic understanding of plumbing.
However, some older properties have more serious plumbing issues. These houses frequently have zinc-coated iron pipes, which progressively lose pressure due to mineral buildup over time. These pipes need to be replaced since they cannot be mended.
Additionally, make sure to look into the possibility that the plumbing-related issue may be caused by lead which may contaminate your water. Sometimes the problem is with the pipes within the house, and other times, it’s with the pipes leading from the public system to your house.
Gardening and Lawn Maintenance
To keep your garden in order, you must pay someone, whether you do the lawn work yourself or employ a specialist. If you have a large amount of land, you may also need equipment like a leaf blower or a lawn mower.
Some homeowner associations include lawn care in their monthly dues. However, this typically implies that the HOA dues will increase.
Most individuals are used to paying for utilities like cable, internet, water, and sewage before they become homeowners.
Some of your bills may be included while renting. However, once a house is yours legally, you should prepare to pay more for utilities and spend more on them.
Talking to your neighbors is a fantastic approach to learn about utility prices in your new home and can assist you in developing a budget for these supplemental fees.
The cost of furnishing your new house is one sometimes overlooked expense. You might not have all the furniture you need to furnish your new area when you move.
Make sure to include new furniture, paint, drapes, and other design items into your budget, as they may add up quickly.
Pool, Patio, or a Deck
There are a lot of expenses involved with installing, managing, and keeping patios and pools, whether you want to add one or the house already has one.
You must factor in maintenance expenditures, especially if the deck is built of wood, even if it’s in excellent condition when you purchase your property. Maintaining your home’s patio will be necessary to keep it in peak condition.
It’s crucial to feel secure in your new residence. Your home could already have a hardwired security system, so if you decide to use it, you’ll be responsible for the monthly monitoring price.
New homeowners will want to address any aesthetic issues with their roof as soon as possible, such as shingles that are missing from it or areas where it is beginning to age. However, a leaking roof may ruin your home’s exterior, inside, and financial situation.
What Are the Advantages of Home Ownership?
Owning a house has a lot of advantages. One of the most significant advantages is that it aids in equity building.
The value of the home you own represents your equity. When you pay off your mortgage or when the market price of your property grows, equity can grow organically.
Making additional mortgage payments might also help it grow. Additionally, homeownership may provide tax advantages and aid in credit building.
Before receiving the keys, you should know the costs involved in purchasing and acquiring the new house. Most people only consider their monthly mortgage payments on their homes when considering the costs of homeownership. In addition to property taxes and insurance, maintenance and repair expenses must also be considered.