Becoming a homeowner is a dream many people have. Owning a home means that you no longer have to think about rent, and it has several advantages over renting. It is also a great way of building wealth.
Even though owning is often cheaper than renting when you look at the cost of a mortgage, what many people do not realize is that there are costs that are associated with owning a home. You should know about these costs so you can plan adequately. This article discusses five of the most common ones.
Warranty
When buying appliances, you will often get a warranty from the manufacturer or retailer detailing that they can repair or replace it if there are issues in the first year or a specified period. Buy, what happens if you bought a home with the appliances already installed? What you need in this case is a home warranty.
A home warranty covers the major appliances and systems in your home. Some warranties also cover smaller appliances, but these are often basic plans of other warranty plans. The cost of your warranty will depend on what you want to be covered.
Appliances like microwaves and exhaust fans will not often cost you too much but boilers and washers will. This is why it is so important to find a company that has affordable plans that cover everything you need to protect. Choice Home Warranty is one such company, and it allows you to choose from two different warranty plans. You can read about Choice Home Warranty on the detailed review provided by Top 10.
While the cost of warranty is a cost you have to factor into your monthly expenses as a homeowner, it does not have to cause financial strain, especially if you go with a company providing affordable options.
Property Taxes
Many people calculate their monthly mortgage costs and interest rates and forget to factor in a huge expense: property taxes. Property taxes are charged every year on your home and the land it sits on. These taxes will vary depending on where you live. Hawaii, for example, has property taxes of $675 for a $250,000 home while in New Jersey it is $6000 for a property of the same value.
Those who pay a mortgage pay their property tax together to their lender. The lender keeps this money in escrow and ensures it is paid before the due date.
To plan appropriately, find out what your property tax is and divide it by 12. Add that to the monthly mortgage you pay. Also, remember that your property tax will increase every year so be prepared for that.
Homeowners Insurance
If your home is under a mortgage, you will be required to have homeowners’ insurance. It is also a good idea to have it even after you are done paying the mortgage. Homeowners insurance covers you in case of damage to your home. This is damage caused by natural elements such as storms and hurricanes as well as damage that is not your fault such as a car crashing into your home. Do note that homeowners’ insurance does not cover accidental damage from repairing or modifying your home.
Homeowners’ insurance does not cover some phenomena such as floods, earthquakes and tsunamis; for those, you will need to have hazard insurance.
When getting homeowners insurance also check whether you can bundle it with contents insurance This is insurance that covers everything you have in your home. It can cover everything from furniture to jewelry.
Utilities
There is no getting away from paying for utilities whether you own or rent a home. These include electricity, internet, and cable. There are some new costs you also have to think about. For example, a landlord will take care of water and sewage costs, but you have to take care of these by yourself when you own a home.
Maintenance
This is another cost you cannot get away from and is often the most frustrating because there is no reliable way to budget for it. For example, you might want to have your lawn cut once or twice every month which will cost you about $100. You might also need the exterior of your house painted and this is a fixed cost you can contend with. But what happens if one of your windowpanes breaks in the middle of the month? Or if your basement floods due to a malfunctioning boiler? Or your Electric Radiators stop working?
Experts say that you should approximate your maintenance costs to be about 1 to 5% of your home’s value every year. This can give you a ballpark figure of what to set aside in case you need to do some maintenance.
When shopping for a home you might only think about how much it will cost and how much you need to borrow. However, it is also important to think about and know how much it will cost to own the home. Doing so will help you budget so that you are not caught off guard by these costs.
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