Unexpected Home Owner Costs

When most people budget for buying a home, they only include the mortgage payment. While house prices are at decade lows and mortgage rates are still extremely affordable, making now a great time to buy, there are a number of additional costs that go along with owning a home, costs that do not exist if you decided to rent instead. Of course, renting does not have the benefit of actually owning property, but it also lacks the additional financial burden.

Buying a home is less expensive now than five years ago and than it will be five years from today, but before you buy, it is important to consider all of the costs in addition to the mortgage payment.

  1. Property Tax – Homeowners, along with all of their income taxes, must also pay a property tax when they buy a home. In some cases, this tax is rolled into the mortgage and the bank or lender pays the tax for you, but other times, the homeowner must remember to set aside money to pay this additional fee. Having the tax mixed in with the mortgage is the easiest way to dispatch this tax, but it will also make your mortgage payments higher than you originally thought they would be.
  1. Insurance – While renters will occasionally invest in renters insurance (which protects only the things they actually own in the home that they rent), in most states, homeowners are required to have home insurance, which protects the structure itself. Most home insurance covers standard damage, like fire, wind, and even mold or rot. Those who live near rivers or the ocean may also need to purchase flood insurance, which is generally an additional expense. This cost can also be bundled with your mortgage payment, making it easy to pay, but also raising that mortgage payment again.
  1. Maintenance – Many first time homeowners do not realize how much maintenance a home requires. If a pipe bursts in the wall, you cannot just call the landlord—because you don’t have one. Instead, you have to fix the problem yourself or call a plumber who can fix it for you. You will shoulder all of these costs, because technically you own the property. The smartest way to plan for both regular maintenance and for emergencies is to set aside money every month in a special fund. 
  1. Utilities – While some renters are required to pay for their utilities, they are generally responsible only up to a certain point, and after that, the landlord foots the bill. In addition, renters are usually only required to pay for electricity and water, while homeowners are responsible for every utility bill their locality requires. Some bills include electricity, gas, water, sewer, trash pickup, snow plowing, road maintenance.

If you look over this list and still find that owning a home in within your budget, now is the time to buy.

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