Photo (cc) by MarkMoz12
It is easy for first-time homebuyers — and others — to get caught up in the excitement of purchasing a home and forget to factor in the true costs of homeownership.
Here are four “hidden” homeownership costs that go far beyond simply covering the mortgage. Make sure to account for them, or you risk seeing your house budget go up in smoke. They are:
When my husband and I bought our first home together, we failed to get an accurate cost for utilities. Instead, we chose to rely on the Realtor and the former homeowner to estimate the cost of heating and cooling the house.
That was a mistake. The home is a 3,700-square-foot ranch house with two separate furnaces built in the 1970s — and our winters are incredibly cold.
We were shocked when we received our first big winter heating bill — it was $200 more than we anticipated for the month. Yikes!
Make sure you properly budget for utilities — including gas, water, electricity, telephone, internet and garbage — when you figure out your monthly home budget. Ask the homeowner for recent copies of utility bills — rather than his or her simple estimate — so you have realistic numbers.
If you’ve never owned a home before, you may forget to factor in a home’s maintenance costs when configuring your budget.
Routine maintenance costs for things like paint touch-ups, carpet cleaning and gutter cleaning can really add up over the course of a year. According to Realtor.com:
A standard rule of thumb is to budget at least 1 percent of your home’s purchase price each year for home maintenance costs.
Do you need to purchase appliances or furniture for your new home, or can you live with what you have? Money magazine says:
Bring as much from your old home as possible, giving yourself six months to settle in. At that point, you can determine what new items you actually need.
4. Private mortgage insurance
If your down payment is less than 20 percent of the purchase price of the house, you are required to get private mortgage insurance, which protects the lender if you default. The fees for PMI vary. According to Realtor.com:
The rules are complicated, but usually once you have paid down the mortgage so you owe less than 78 percent of the purchase price, you can drop the PMI payments.
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