Hidden Cost of Homeownership

Hidden Cost of Homeownership

(Ok maybe not hidden, but ones that you may not always think about when buying a home)

It's easy when you are purchasing a home to focus on the down payment, closing costs, and monthly payments. Those of course will be your largest payments and you need to make sure you can afford them. But, there are other costs associated with purchasing a home, that if you are currently renting, you might not think about.

Some of those costs include - 

• Property taxes
• Home Insurance Premiums
• Maintenance and repair costs
• Pest Control
• House cleaners, gardeners, etc
• Electric, gas, water, trash and more.

Property taxes are often included in your monthly payment to your lender, but if not, they can add up. In California, the property tax rate is composed of three types of levies: general tax levy, voter approved bond indebtedness repayment, and special district assessments. The general tax levy is frozen at 1%. Depending on where you live, the other components can vary, but on average property tax in California is 1.25% of the assessed value of your home. So if you purchase a home for $600,000 expect your annual tax bill to be approximately $7,500.

Home Insurance premiums are another expense you will be dealing with when you purchase a home. They can vary greatly, so you always want to shop around, but a good way to estimate it is to divide the value of the home by 1,000 and then multiply by $3.50. So that $600,000 home would have an annual Home Insurance premium of $2,100. This is also typically in your monthly payment to your lender. So if you hear them mention PITI that stands for Principal, Interest, Taxes, and Insurance and becomes your monthly payment.

Maintenance and Repair Cost - Let's face it, if you own a home, things are going to break. That new stove, will be an old stove one day and it will quit working. That fence might not handle the rain and wind as well as you hoped it would. Your sink faucet will spring a leak, the garbage disposal will quit, door knobs will break, and let's not talk about what happens if the HVAC unit goes out. So when you are a home owner it is important to budget for repairs, so that when they come up, you are ready. One estimate says to set aside 1% of your home's value every year for repairs. That's might be a little on the high side for us here in California where the home values are so high, but whatever number you come up with, you need to plan on fixing things.

Pest Control - This isn't a big expense and it's one you can do yourself, but after a couple of ant infestations you may decide to turn it over to the pros and it can run around $70 per month.

House cleaners and Gardeners - If you've been renting an apartment you might find that new big home to be a big chore to clean, or that gorgeous yard with all the grass and trees might end up taking up your weekend you had hoped to spend relaxing in your yard. Again, both of these are chores many people decide to do for themselves and avoid the cost, but if you think you might turn those over to the pros, make sure to include it in your budget.

Utilities - Even if you were renting you were probably paying many of your utilities. But expect that cost to go up if you are buying a larger home. If you are moving to the Central Valley, expect to be running your A/C during the summer which means a higher electric bill. If you are moving close to the Bay, those bills drop as the climate is mild and you can get those nice breezes coming through your windows to cool things down. But wherever you buy at, utilities will be a big monthly expense that you need to plan for.

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So, did you make your budget and decide you are ready to be a homeowner? Then you should call me and we'll go find you a home!