Most adults are aware that buying a home is one of the most expensive and significant purchases they’ll make in their lifetimes. However, fewer are aware of just how much they’ll need to keep this investment intact. For this reason, many end up purchasing a property they can’t afford to maintain resulting in the need to sell or a foreclosure. To minimize the likelihood of this happening to you, it is imperative that you are fully aware of what will be required of you financially as a homeowner.
One of the first and most commonly considered expenses of owning a home is the mortgage payment. Through your chosen mortgage company, you will be required to repay both the principal amount of the loan (meaning the amount you borrowed), along with accrued interest. Depending on the type of mortgage you have there may be other fees you’re required to pay for on a monthly, bi-annually, or annual basis so you’ll need to read your loan agreement in full.
Every homeowner who purchases a property with the help of a mortgage company will be required to have property insurance. These policies are used much like a car insurance policy and offer financial protection should your home be damaged. Such damage typically includes burglaries, vandalism, and natural disasters. However, depending on where you live you may have to purchase additional insurance like a flood. Though your property insurance may not be more than a few dollars per month, some require annual or biannual payments instead of monthly payments which you’ll need to prepare for.
Every homeowner is required to pay taxes on their property to the local government. Varying by state and the appraisal value of your home, your property taxes can range from $2,100 to ten times that. They are required to be paid every year. Some mortgage companies will include your tax payments in your monthly mortgage payments so be sure to read your loan agreement in full. If not, you’ll need to contact your local taxation office to find out how frequently and where your taxes should be paid.
Though not necessarily required to own the house, it would be pretty difficult to live in a home that didn’t have water, gas, or electricity. Utility bills are a necessary expense for homeowners and depending on where they live and how efficient their home is, it could cost several hundred dollars per service every month.
Your home requires continual upkeep in order to stay intact. From having the heating and air conditioner serviced to regular plumbing and electrical service, maintenance is necessary to ensure all systems are efficiently working in the home. It is equally as important to maintain the exterior of the home including the roof, lawn, trees, foundation, siding, windows, etc. Though there are affordable service contracts available, the average homeowner should budget approximately 1% of their total property value each year to upkeep.
Emergencies and Repairs
Whether you purchased your home as a new construction or your property happens to be older, there will come a time when you have to pay for repairs and emergencies. From broken or bursts pipes to a damaged or outdated furnace, there are a lot of things that could go wrong at a moment’s notice that you need to be prepared for. Home repairs and emergencies tend to cost more than maintenance tasks and could be several hundred or thousands of dollars required upfront.
Another expense that should be accounted for as a homeowner is the aesthetics, decor, or appeal of the home. Over time, the furniture, appliances, and decor items you purchased for the home will become worn out, dated, or inefficient, and require some upgrades. Though not as frequent or as urgent as the above-mentioned expenses, it is a cost to homeownership that should not be overlooked.
Owning a home is a goal that a lot of people have today. Before you decide to make homeownership a reality for yourself, look at all the expenses that will be required of you. Compare it to your current income and be honest with whether or not you’re ready to take on that responsibility.