Monthly Costs of Home Ownership
In determining a budget that you are comfortable
with it's wise to look ahead and try to develop a clear understanding of all of the
ongoing expenses that are involved in home ownership. We include here, a list of those
1) Mortgage Payment - If you are like most
people, you probably intend to borrow some of the funds required to purchase a home. Of
course, the lender will expect you to repay the debt with a monthly payment that includes
a portion of the principal amount loaned, plus interest. Allow your banker or your agent
to assist you in determining what you can afford. Read our report entitled,
"Qualifying for a Mortgage."
2) Property Taxes - Just when you thought
you'd already been paying every imaginable tax, the city springs this one on you. Yes, of
course every homeowner pays taxes to the municipality to pay for civic services and
infrastructure. The amount of the property taxes typically varies depending on the value
of the home.
3) Utilities - The monthly costs of natural
gas, electricity, water, sewer, garbage collection, telephone, and even cable TV have to
be worked into the budget.
4) Insurance - You'll need a home insurance
policy for at least as long as you have a mortgage on the home. Most homeowners see value
in maintaining insurance on the property indefinitely.
5) Condominium Fees - If you are planning on
purchasing a condominium or townhouse you will be required to pay a monthly fee called
condominium fees. These fees cover the cost of maintenance and insurance for the common
areas of the condominium complex.
6) Home Maintenance - Gone are the days when a
leaky faucet could be remedied with a quick call to the landlord. As a homeowner, you will
be solely responsible for the upkeep of your home. If something breaks, it's you that has
to fix it, or at least pay for the repairs. Over time, most components of your home will
be subject to wear or obsolescence, and consequently need to be replaced. Many people
forget to take into account the ongoing costs of home maintenance. In some cases, this
will lead to a slow but steady deterioration of the property. As the property goes down
hill, so does its value. The owner of a neglected home usually pays the greatest price
when they attempt to sell the home. Buyers expect to "steal" homes that are
poorly maintained. It's wise to plan to invest an average of 1.5% of your home's value in
annual maintenance and improvement.
7) Yard Maintenance - Perhaps you have a green
thumb and look forward to caring for your new yard. Maybe you've already got more to do
than you can handle. If that's the case, plan to hire someone to keep your yard looking
great. Your neighbors will love you!