Today, with more people choosing to rent indefinitely, homeownership is being delayed longer than ever before. Nevertheless, buying a home is an American rite of passage and most households will eventually own their own dwellings. If you are considering the move from tenant to homeowner, be aware of some of the unseen costs of homeownership.
Owning a home is more expensive than most folks realize and one reason many millennials aren’t buying until later in life. Before you can know if you’re ready for homeownership, reflect on these five unseen costs that renters don’t have to deal with.
On average, Americans spend about $ 2,300 on property taxes for their homes. If you want to estimate what you property taxes might be in advance, divide the amount by 12 and add this figure to your estimated monthly payment.
You should be able to find this information in your possible property’s MLS listing as the systems contain hundreds of fields of data about the features of a property. Otherwise, you may be able to access these figure with a mortgage calculator.
Home owner association (HOA) dues
Most renters never see the HOA fees for their garage, gym, and pool access because these are usually covered by their rent. These HOA dues can be anywhere from 200 to 400 dollars each month and cover costs of maintaining neighborhood landscaping, the health center, communal pool and other common areas. Homeownership means that these fees are a monthly expense beyond the mortgage payment.
You can legally own a home without homeowners insurance but if you have a mortgage on the property, most home loans require you have coverage that the mortgagee finds appropriate. A lender typically will require the home insurance coverage to protect the property in case of damage cause by unforeseen circumstances, such as fires.
Among other reasons why homeowners need insurance is it protects them from expensive liability lawsuits, covers them in the event of weather damage to their homes, and pays for losses sustained from theft. It’s a two-way street; the insurance will protect both the homeowner and the lender.
Homeowner’s insurance is calculated at an average of $35 per month for every $100,000 of your home’s value. If you are buying a condo, you’ll need a condo insurance policy which can cost anywhere from100 to 400 dollars annually.
Maintenance and repairs
That wonderful dream home may be perfect right now but nothing lasts forever. Houses need maintenance, water heaters wear out, air conditionings units don’t last forever, and your roof will have to be redone sometime.
As a renter you’d be calling the landlord for any small repairs that always crop up. The fridge light stops working, your toilet keeps running, the bedroom window started sticking for no apparent reason.
Homeownership means making cash plans and contingency funds over and above the down payment. You’ll have done your research and considered the typical maintenance expenses advised for your type of dwelling. The experts recommend keeping between 1% to 4% of the home’s value in reserve yearly for any maintenance and repairs.
Of course, this amount increases as your home ages. But if you’ve bought wisely, your home will be an asset that appreciates over time