Owning a home comes with a lot of responsibilities and expenses. Knowing and understanding what you can expect and budget for is the best way to prepare for the costs of home ownership. Some costs come in the form of monthly payments, such as your mortgage, homeowner’s insurance, and property taxes. Other costs come in the form of home maintenance and appliance upkeep. This article will help you understand and plan for all of the real costs of home ownership.
1. Mortgage payments
Owning a home comes with a lot of costs. One of the most obvious is the mortgage payment. This is the amount of money you pay each month to the bank in order to own your home. The size of your mortgage payment will depend on a number of factors, including the price of the home, the interest rate, your down payment and the length of the mortgage. The good news is that, over time, your mortgage payments will usually go down thanks to the built-in interest rate.
2. Taxes and insurance
As a homeowner, it’s important to be aware of the additional costs that come with home ownership. One of the biggest expenses is property taxes. Your property tax bill is based on the value of your home, the assessed taxes in your municipality and your exemptions (if any). The average American homeowner pays around 1.35% of their home’s value in property taxes each year. Add to that the cost of homeowners insurance, which averages $1,083 per year, and you’re looking at some significant expenses. Be sure to factor these into your budget when considering a home purchase.
3. Closing costs
Closing costs are one of the less-known aspects of buying a home, but they can quickly add up, so it’s important to be aware of them. Typically, you’ll have to pay closing costs when you finalize your mortgage. These costs include things like the origination fee, underwriting fee, appraisal fee, title search and title insurance, among others. On average, closing costs amount to around 2% of the total mortgage amount. However, this number can vary greatly depending on your location and the type of mortgage you choose. It’s important to factor these costs into your budget when you’re buying a home, so you’re not surprised by them later on.
4. Appliance replacement costs
The average lifespan of a fridge is 10 years, while a stove will last around 13 years. If you’re planning to purchase a home in the near future, be prepared to factor in at least a few thousand dollars for replacements costs. While this may seem like a lot of money, it’s important to keep in mind that the cost of a new appliance will pale in comparison to the cost of a new roof, windows, or HVAC system. The best way to avoid surprises down the road is to ask the seller about the age of the appliances and whether or not they’ve been replaced recently. If not, you can expect to spend a few thousand dollars on replacements in the first few years of owning the home.
5. Homeowner’s association dues
If you’re not familiar with homeowner’s association dues, they’re essentially a fee that all homeowners within the community must pay in order to maintain the common areas. This includes things like the pool, clubhouse, sidewalks, and more. The dues amount can vary depending on your location and the size of the community, but it’s something you’ll definitely want to factor into your budget if you’re considering purchasing a home.
In total, homeownership is a significant expense, with the average cost of ownership estimated at approximately thousands per year. This number doesn’t take into account any renovations or updates you do to your home, which can easily double this amount. Unfortunately, a lot of people don’t understand what it really costs to own a home until they close on their first mortgage and move in – and by then it’s too late.