Anyone who owns a home knows that there are many additional costs associated with owning a home. Many first-time homeowners base their decision to buy a home on their ability to make the monthly mortgage payments. In fact, there are many other costs that go into owning a home than just the mortgage payment.
First-time homeowners are often startled by the hidden costs of owning a home. The traditional housing expenses (principal payments, interest, taxes and insurance) are just the beginning. Maintenance, repairs, supplemental insurance, home improvements and decorating can cost you thousands of dollars a year—more than you expect.
Additionally, a home purchase triggers a series of additional spending on appliances, furnishings and remodelling activities that exceed typical spending levels of non-moving owners or renters and can persist for two years after moving.
Let's take a look at the most overlooked items that tend to be a burden to all homeowners:
1. Home improvement costs
Your new home may require some repairs or remodelling. One of the great things about being a homeowner is the opportunity to put your personal stamp on a house. It’s easy to go overboard with home improvements, though. Relatively few projects add much lasting value to your home, let alone guarantee that you will recoup your costs.
Homeowners are more inclined to purchase luxury items that renters would not, such as granite counter tops, pricey fixtures, alarm systems and other gadgetry. The cost of these luxury amenities can easily add thousands of dollars to the cost of owning a home.
2. Furnishings costs
You will also want to budget money for additional furnishings. Since your new home is likely to be larger than your apartment, you will probably need more furniture. You might also want window treatments, lighting fixtures, carpet or area rugs and appliances, all of which can add up to tens of thousands of dollars.
1. Monthly mortgage payment
Probably this is the easiest to understand. If you have selected a fixed rate mortgage, your lender will tell you exactly how much your monthly payment is going to be.
2. Property taxes
Property taxes can be demanding because even if you've paid off the mortgage, you still have to pay a monthly fee to the town and/or the municipality in which you reside. It can easily total $500 to $1,000 or more a month, particularly in large cities where property values have soared in recent years.
3. Utility bills
The monthly utility bills such as electricity, gas and others could amount to $400 or more, some current home renters may not be aware of this as most likely it is included with their monthly rent. If you are moving to a condominium, you should also add monthly condominium fees.
4. Maintenance costs
How much your home will cost you in maintenance and repairs depends on several factors: the age of the home, how well it’s been treated by previous owners, the harshness of your climate and how much money you want to get out of your home when you sell it.
You should budget between 1% to 2% of your home’s value for annual maintenance. If you bought a $200,000 home, for example, you should set aside at least $2,000 a year, or around $200 a month. Some years you'll spend less, but others you could spend more. A new roof for your home, for example, can cost $4,000 or more.
Naturally, some homes cost more to maintain than others. Older homes usually need more maintenance than newer homes, even if it has been recently renovated. Also, don't assume that because a home is new, it won't need any maintenance for a while. All homes need to be attended to on a regular basis to keep them from falling into a state of disrepair.
The Bottom Line
Being a homeowner brings with it a great sense of pride and gives you enormous stability and security knowing that you will always have a roof over your head, however, it can cost a lot more than you think. So to avoid any unpleasant surprises, make sure you are aware of these extra costs.