Homeownership comes with several expenses, but many new home buyers only think about the fees they have to face up front, such as closing costs and inspection fees. Budgeting for a home doesn’t end when the keys are in your hand. You’ll face many recurring expenses associated with owning your own home throughout your time there. Following are 6 of the most major ones.
1. Maintenance and Regular Care
You may not realize how much work goes into maintaining a home when you’re renting an apartment. Many tasks probably happen in between tenants so you don’t even see them. When you own a home, though, you need to take care of these matters yourself. One average, homeowners pay about 1% of the property’s value every year in maintenance and repair fees. So if your home is worth $400,000, be prepared to budget around $333 per month for those unexpected repairs. Maintenance tasks may include:
- Appliance repair
- Annual HVAC tune-ups
- Roof care and replacement
- Flooring repair and replacement
- Carpet cleaning
- Plumbing repairs and maintenance
- Cleaning and repainting the exterior of the home
2. Landscaping and Lawn Care
As a homeowner, you need to keep up both your home and the land that it’s on. In the early days of homeownership, this usually means hiring someone for the job or investing in a lawn mower, trimmer, and other tools for lawn care. On an ongoing basis, you’ll need to cut the grass, care for any flowers or other plants you have, keep trees trimmed back, and any other outdoor projects. If you hire a professional for a landscaping/outdoor renovations, you could be looking at costs up to $35,000. Smaller projects all depend on the size of the yard. Larger acreage can cost around $10,000 and smaller acreage around $2,000. If you hire a lawn care service, be prepared to spend $30-$50 per month. On the other hand, if you are willing to spend the time taking care of the landscaping yourself, you can look to save more than half on your landscaping bills. It’s up to you whether you do these things yourself or hire a professional, but the expenses should factor in to the total cost of homeownership.
3. Insurance Expenses
Unless you’re able to pay for your home up front, your mortgage lender will need you to carry homeowners insurance. Even if you aren’t required to have this protection, it’s a wise investment. Insurance can cover situations such as natural disasters, and medical injuries. How much coverage you choose has a significant impact on the price of the policy. If you have some more valuable items, such as expensive jewelry, antiques etc., these probably won’t be covered in your general insurance plan. The cost of homeowner’s insurance also depends on the size, age, and value of your home as well as location, neighborhood crime, and fire safeguards. If you live in an area that is at high risk for certain natural disasters, or even if you have a low credit score, you’ll have to pay more for protection.
4. Property Taxes
This capital tax on property, is collected to support the administration of the state, county, port, road district, rural library, metropolitan park, cities and towns, schools, fire protections districts and miscellaneous taxing districts. This annual cost is a necessary part of homeownership for any type of property. The value of your home determines what you’ll pay in property taxes. The average cost of property taxes are 1.15% of the median home value in the United States. The way that property taxes are calculated would be through the use of the mill levy and the assessed property. This annual cost is a necessary part of homeownership for any type of property. Rates vary by state.
5. Regular Homeowner’s Association Fees
Homeowners’ associations, or HOAs, are formal legal entities created to maintain common areas by making sure that your neighborhood has a great curb appeal. It also has the authority to enforce deed restrictions. Most condominium, townhome developments, and many newer single-family subdivisions have HOA’s, which are usually created when the development is built. Be prepared to pay on average $200-$400 on HOA fees. In addition to monthly fees, if a major expense, such as a new roof or a new elevator, comes up and there aren’t enough funds in the HOA’s reserves to pay for it, the association may charge an extra assessment that can run into the thousands of dollars. These are usually charged monthly or quarterly. Before buying a home, find out if there’s a homeowner’s association in the neighborhood and what the fees are. Many neighborhoods in the state of Florida and California have a homeowner’s association and other states, like Massachusetts, have virtually no homeowner’s association.
6. Utility Bills
While you typically pay utilities even in an apartment, you may find that utilities for a home are much more expensive. The larger the home, the most costly your utilities are. Typical utilities will include:
Features like a pool or hot tub will drastically increase what you pay for water. Many neighborhoods also charge you for trash pick-up and curbside recycling. The cost for household utilities can be $300-$500.
Consider these costs well ahead of time to make sure you know what you can afford. Only by adding these expenses in to your monthly mortgage payments can you accurately estimate the real cost of owning a home.