Hidden Costs Of Owning A Home
Many people look at mortgage versus rental costs when they make the decision to purchase a home. When the monthly price of a mortgage falls below that of typical rentals in the area, it seems to make financial common sense to move forward with the buying process. However, this expense isn’t the only one that you should consider. Hidden fees come in many forms, and can add up to thousands or tens of thousands of dollars more per year.
Loan Closing Costs
You encounter a lot of fees that you may not expect during the house buying process. These expenses include recording the deed, title insurance, loan origination, paying points on your mortgage rate, and others.
Private Mortgage Insurance
If you have a downpayment that’s less than 20 percent of the home’s value, then your lender may require private mortgage insurance, or PMI. Due to the lower downpayment, the financial institution takes more of a risk with the loan. The PMI serves to protect them against potential losses if the homeowner stops making payments.
The property taxes for your area may add a substantial amount to your monthly mortgage payment. This expense is incredibly region dependent, so it’s important to look at tax records of the neighborhood and the general property tax rate of the city before choosing a house.
Many people are past the point of being able to move their stuff with a small moving van rental and some friends when they purchase a home. Factor in any professional moving expenses, as well as whether you need new household goods or furniture to work with that space.
When you have a mortgage on a property, the lender requires you to have homeowners insurance. This policy protects the home, the personal property inside of it, and also offers liability coverage. The cost of the premium varies based on where you live, how much coverage you take out, and whether you need specialized services added to the policy.
Ongoing maintenance is necessary to keep your home in good repair. You can avoid major issues down the road when you’re proactive about the ongoing tasks like checking on the roof for damage, cleaning the gutters, washing the siding and caring for the lawn. Most ongoing maintenance tasks are DIY-friendly.
Major Systems Repairs
If electrical, plumbing, or your HVAC systems fail, you have major quality of life problems to worry about. These repairs are expensive and may end up costing tens of thousands of dollars. Depending on the complexity of the repair, it can also take up a lot of time.
Appliances don’t operate forever and the ones in your home may have seen better days. As they fail beyond repair, you’ll need to pay for the replacement. Purchasing used and refurbished appliances can reduce this expense, although it may result in you replacing the equipment more frequently.
The potential security deposits to turn on the appliances to the home and the monthly costs can add up quickly. Talk to the previous homeowner about the average utility bills before you make a purchase decision. If you don’t have access to that information, you may be able to talk to the utility company about the averages for that area.
Do you have areas of your home that aren’t quite suited to your tastes? Sometimes the changes are small and cosmetic. You put up a new coat of paint or some wallpaper to better match your style. In other cases, the alterations are more drastic and require swapping out flooring, changing room layouts or even adding on to the home. If you have renovations in mind before you choose the house, think about how much it would take to bring it up to your standards and whether that’s feasible.
Cost to Sell
If you’d like to move out of your home, you could face plenty of expenses with the home selling process too. Renovating parts of the home to make it more appealing to sellers, the fees associated with selling, and any incentives that you offer the buyer all add to the overall cost of the home.
Do you live in a neighborhood with a homeowners association? They typically charge a monthly or annual fee that covers services associated with living in the area, such as access to common areas, lawn care, and community events.
HOAs can be restrictive about what you can and can’t do with your home and property, so review the bylaws so you know they’re rules you can live with. You’ll find HOAs more often in new developments, historic districts, and in condominium buildings.
Double Paying Mortgage and Rent
Are you purchasing a home that is under construction, or one that requires extensive renovations before it’s liveable? Factor in the months that you’ll be paying your current rent plus the mortgage on top of it.
Hidden fees can turn a pro-mortgage decision into a pro-renting one, in some cases. A house is one of the most expensive things that a person can purchase in their life, so it’s important to know all of the costs involved before taking on that responsibility.