Additional Costs Of Owning A Home

When buying a home, it’s important to budget for more than just the down payment and closing costs.

When transitioning to homeownership, it’s easy to focus only on the monthly mortgage payment. Unfortunately, buyers, especially first-time homeowners, sometimes forget to incorporate associated costs into their budget.

Not budgeting for those other costs of homeownership is perhaps the single biggest mistake inexperienced buyers make. However, falling victim to this common blunder is avoidable. Consider these costs as you establish your monthly housing budget:

• Trash service. For many apartment dwellers, the cost of trash removal is rolled into the rent – invisible but still there. However, that monthly, quarterly, or annual cost will quickly make itself known for homeowners.
• Property taxes. The township or municipality where you live will want a slice of the action and some much-needed tax revenue. The problem with property taxes is they may sometimes rise unexpectedly, making budgeting for them as difficult as it is necessary.
• Condo or homeowners association fees. If the condo or home is part of a neighborhood association, it’s likely to have dues to pay and those costs are not voluntary. Moreover, those fees are also subject to rise with inflation, sometimes making them unpredictable.
• Sewage fees. Wastewater treatment is a big business and expensive. Unless you have an on-premises septic tank, monthly or quarterly sewage disposal fees will need to be paid. Even if the property has on-site septic, future developments may require a different disposal plan.
• Lawn care. When living in an apartment, mowing the lawn isn’t a concern, and owning a lawnmower isn’t necessary. With a home, quality lawn-care equipment or paying someone to keep the landscape well-kept will be an additional cost, especially if you’re part of a homeowner association.
• Insurance. Hopefully renter’s insurance for the contents of your apartment already exists in your budget, but the cost is most likely negligible. The same cannot be said of homeowner’s insurance and many first-time buyers are surprised at how much that protection can cost.
• Routine maintenance. Without a landlord to call, you’ll be responsible for every piece of ongoing maintenance and the costs associated with them.
• Major (and minor) repairs. Eventually something big will break – whether maintaining your home well or poorly. You’ll be on the hook for any necessary repairs and those costs can be unpredictable. That’s why an emergency repair fund is a must for homeowners.
• Refinancing costs. One thing is sure, the mortgage will likely be the biggest monthly expense a homeowner will have and refinancing the loan can lower both the principal and the interest. Unfortunately, those refinancing offers come with their own set of costs. Budget ahead of time to make sure you can move forward should a hard-to-pass opportunity presents itself.

There is little doubt that homeownership has significant financial benefits. Rather than spending on rent, you get to build equity in a property that will hopefully rise in value over time – increasing family wealth and enhancing your financial picture in the process. Even so, it’s important not to downplay the actual costs homeownership can introduce. Being prepared for the real cost of owning a home is essential, and that starts with recognizing the reality of the expenses outlined above.

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