One of the biggest mistakes that homeowners make is that they don’t budget for all of the expenses that come with buying a home.
They get taken by surprise when they budget for a monthly mortgage payment, but then have to deal with unexpected homeowner expenses. These expenses eat away at savings, vacations, and living expenses.
Only 40% of Americans would be able to pay for an unexpected expense out of savings. The rest would pay with credit or loans, potentially putting their finances at risk.
How can you be sure that you are budgeting for your home? Read on to learn what the biggest homeowner expenses are that most people don’t know about until they arrive.
1. Closing Costs
You might be thinking that you have your down payment and you’re ready for the monthly mortgage payment. You’re at the closing table and you discover that you have to come up with additional money to cover the real estate agent’s fees, title fees, taxes and lender’s fees.
These come out to about 6% of the purchase price for the agent’s fees and another 2% for additional closing costs.
2. Homeowner’s Insurance
This is another hidden homeowner expense. This will vary depending on the size of your home, what needs to be covered, and any special circumstances. Get some quotes from companies that you already work with for auto insurance to see how much you can expect to pay for homeowner’s insurance.
You also want to review this every year, as your needs and property value may change. Sticking with one policy year after year could leave you uncovered when you need insurance the most.
3. Property Taxes
You may have moved to a great school district for your family, but the hidden costs may come in an increase in property taxes. These will vary depending on where you live and the value of your home.
In Washington, DC, you can expect to pay about $4,000 a year in property taxes. Meanwhile, in Arkansas, you can expect to pay about $1,000.
4. Repairs & Maintenance
Repairs and maintenance of your home are by far the homeowner expenses that catch people off guard. How much repairs and maintenance that needs to be done will depend on the age of the home and the age of certain parts.
Your home may be 75 years old, but if your water heater was replaced in the last year, you don’t have to be concerned with that type of replacement.
You’ll want to get to know the local plumbers, contractors, and electricians before you need help. Those relationships will come in handy when something happens, and it will. You can take a look at Twin Home Experts for an idea as to what to look for in a plumber.
5. Furnishing Your New Home
You see a new home as a great investment until the unexpected homeowner expenses add up. You’re going to want to take a shower in your new home at some point, right? You’ll need to buy a shower curtain and all of the furnishings for your new home.
In some cases, you’ll have a lot of what you need. In other cases, a trip to the furniture store may be in order.
6. Locks and Security
You have the keys to your home, but so do other people. The former homeowners and whomever they gave a copy of their keys to can access your home.
If there’s a security device in the home, they can have access to that as well. One of the first things on the list of things to do when you buy a new home is to change the locks and security system.
Did you move from an apartment to a single-family home? You’re going to be in for sticker shock when you get your first utility bills. You’re going to have to heat and cool more square footage, which means a much higher utility bill.
On average, families spend about $2,000 a year on utilities, or $166 a month. If you’re used to spending about $100 a month on utilities, you’ll need to be ready to increase your budget.
8. Interest Costs
The interest rate is usually a hidden homeowner expense because it’s rolled into your mortgage premium.
What you may not realize is how much interest you’re paying for your home. If you have a lower credit score, you could wind up paying thousands more in interest.
9. Commuting Costs
This is often overlooked until you’ve been in your new home for a few weeks. If you’ve moved to a neighborhood that is a little further from where you work, you’re going to have to account for time and gas for your new commute.
Depending on what kind of car you have, your car fuel and maintenance costs could go up quite a bit. There are also increased car insurance premiums because you’re driving your car more and you have a longer commute.
10. Homeowner’s Association Dues
Are you moving into a new development or community? This could be governed by a homeowner’s association (HOA). There are a lot of advantages to living in an HOA, such as yard maintenance, clean common spaces, pools, and community centers.
On the downside, the HOA has a set of rules that govern the community. There are also monthly fees attached to those amenities. Once you buy your home, you’re essentially agreeing to be a member of the community and pay those monthly HOA dues.
Be Prepared for Unexpected Homeowner Expenses
Buying a new home, especially for the first time is one of the most exciting adventures you can take. It’s also one of the most stressful. One of the reasons why it’s stressful is because many people don’t account for all of the homeowner expenses that are involved.
This list provides an overview of what you can expect when you own your own home, beyond what your mortgage payment will be. This will help you be prepared for these expenses and you can make smart financial decisions.
Would you like more great home tips? Check out this article to learn what the best additions for your backyard are.