11 Hidden Costs Of Owning A Home
By Michele Lerner | Investopedia – Mon, Apr 23, 2012 3:41 PM
Low mortgage rates and more affordable home prices in some housing markets are creating renewed interest in homeownership, especially among young renters who are tired of seeing their rent costs rise every year. Homeownership can be a path to a solid financial future because each monthly mortgage payment will lead to increased home equity and rising home values will eventually add to your asset. However, potential buyers who are unprepared for the true cost of owning property may be shocked by the bite homeownership can take out of their wallet in addition to their mortgage payments.
Inspection and Appraisal Fees
Before you purchase a home, you need to pay for a home inspection, an appraisal and perhaps additional inspections for pests or radon. The costs of these inspections are borne by buyers and are a necessary protection to avoid buying a flawed property or paying too much.
Closing Costs
Some buyers are able to negotiate with the seller for a contribution for these costs, but buyers need to be prepared with the cash for anywhere from 2% to 4% of the mortgage balance depending on your area.
Taxes
As a homeowner, you'll need to pay property taxes, which are generally part of the escrow you pay into each month. Remember, even if you have a fixed-rate home loan, your property taxes could go up and increase your monthly housing costs.
Insurance
Your lender will require home insurance, which could be costly depending on a variety of factors including the construction materials of your home and the location. Even if you have renter's insurance, you'll find that home insurance costs more because you are paying for the ability to rebuild your home in addition to replacing your personal possessions. Insurance costs can also rise over time, and you may need supplemental insurance if you live in a flood or earthquake zone.
HOA and Condo Fees
If you buy a home within a homeowners' association or a condominium association, you'll be required to pay a monthly or quarterly fee. These fees can rise, or your association may need to charge a special assessment for projects such as repaving the parking lot or repairing a roof.
Moving Costs
Not only will you need to pay a moving company or rent a truck to move your belongings, but you may need to make deposits to start your utilities.
Utility Bills
Depending on where you live now, your costs for electricity, gas and water could be higher when you move into your own home. You may also need to pay for garbage collection along with your Internet, cable and phone bill.
Furniture and Decorative Items
While this is essentially a discretionary expense, most people who move from a small apartment to a larger home need to buy at least some new furniture. You can keep your expenses in this category in check by waiting for a year or two to buy extra things and carefully comparing prices before any big purchases.
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