How to Budget for the Costs of Home Ownership

by Gary Ashton

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The actual cost of home ownership goes beyond the final agreed upon price of the property. When beginning the home buying journey it’s essential to budget for the complete picture. The full cost of home ownership begins after the last page of paperwork is signed.

Monthly Mortgage

A quick Google search will generate at several mortgage calculators designed to help homebuyers determine how much house they can afford. This is the perfect place to begin when determining your budget for the cost of home ownership. Simply plug in the home’s cost (home value), your loan amount, interest rate, and the length or term of the loan.

It may also have the capability to factor in the PMI (mortgage insurance if you’re paying that), home insurance, any HOA fees, and even property taxes.

Property Taxes

Renters don’t pay property taxes directly but homeowners do. When buying a home, look to the MLS listing for the current property taxes. Take that number and divide it by 12 to determine how much money to save each month for the annual property tax bill.

Homeowner’s Insurance

On average, your homeowner’s insurance will cost more than renter’s insurance. Depending on your insurer and the total of the annual amount, you may opt to pay it monthly, every six months, or monthly. When looking to trim overall costs, consider insurance options that offer discounts if you bundle your policies. However, be sure your home insurance does cover your home properly — if the home’s appraised at $170,000, a policy that only covers $120,000 is likely not enough.

Repair and/or Renovation Costs

Unless the home is a new or newer property, there may be repairs or even renovations that need to be made, especially if you’re buying a place that wasn’t fixed up for before listing. During the home buying process, arrange for a home inspection with a certified Home Inspector. The evaluation performed by this professional can help determine your repair/renovation costs, allowing you to factor these into your total cost of home ownership.

General Upkeep and Maintenance

Every home needs general upkeep and maintenance that may include things like lawn service (or you purchasing a lawn mower and taking on that chore). Other general upkeep to consider are items like pool maintenance, twice annual professional gutter and window cleaning, annual chimney sweep appointment (if there’s a wood burning fireplace), plus things like replacing outdated light fixtures, cabinet hardware, and painting rooms. Many cosmetic jobs around the house are easy for even the most novice homeowner to handle, but they will add to the cost of your overall home ownership.

Utilities

Some rental places include utilities with the monthly rent. However, homeowners are responsible for their utility payments. Before buying a home, get an estimate of what monthly utilities cost on average. A larger home with more rooms to heat/cool will typically have higher costs each month for electric and/or gas. Don’t forget to include water estimates as well.

Appliances and Furnishings

The cost of home ownership also includes any appliances and furnishings you’ll need to add to make the space livable. This particular budget item often is overlooked by many homebuyers. If the house needs all new kitchen appliances as well as a washer and dryer expect to add another $400 to $900 (on average) per appliance and that doesn’t include installation fees.

While it may take some time and planning to determine an appropriate budget before buying a home, knowing the complete cost of home ownership can make all the difference.

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