More Than A Mortgage: The True Cost Of Home Ownership
Being a first-time homeowner is a goal for many, but some get so excited that they forget to consider the big picture. Owing a home is more than just paying your lender each month, and full knowledge of the financial considerations is vital before you agree to a purchase contract. Read on to learn more about the true cost of homeownership.
Money due at closing: You should not be caught completely by surprise since you'll be mailed a closing cost summary a few weeks prior to closing, but waiting till then could be unwise. You may actually have to come up with a large sum of money and not have much time to do if you fail to plan ahead. Once you have your purchase contract in hand and a lending guarantee, you can estimate your closing costs by calculating it to be from 2% to 5% of the total purchase price of the home. These costs can vary by locale but include:
- Title insurance cost and search fees
- Taxes and interest on a partial month's mortgage
- Lending fees (points)
- Recording and notary fees
Property Taxes: This payment is often broken up into months, kept in escrow by your lender and paid yearly. If not it will usually be due in November of each year. You can find out how much to expect from your real estate agent or your local property tax authority.
Homeowner's Insurance: You will need to spend a week or so getting estimates on insurance costs, and prices can vary depending on the level of coverage and your home's value. In some locations, you must add on hurricane and flood coverage as well.
Home Maintenance: This is one area that is both frequently overlooked and underestimated. You must set aside some funds for dealing with repairs, or you might find yourself with no air-conditioning in July or no hot water in February. HGTV suggests that homeowners make plans to spend about 1%-3% of your home's value on yearly repairs and maintenance costs. Some maintenance is covered by homeowner's associations, particularly if you live in a condo or townhouse community. Some reoccurring financial outlays to add to your budget include:
- Pest control
- Lawn care
- Pressure washing and painting
- Yearly HVAC system inspections
- Cleaning help/maid service
- Gutter cleaning
- Pool care
Utilities: Another frequently forgotten cost is utilities. Heating, cooling, water, trash removal, internet and television and phone services are all common needs, and the costs can vary. In most cases, you can access the previous usage for water, heating, and cooling by speaking to the utility which will help you plan for future budgeting.
Speak to your local real estate agent for more ideas for estimating the true costs of owning a home.