You've made that momentous decision to buy a home. Your credit score is good, your employment is steady, you're debt-free and you've even saved up enough money to cover a down payment as well as some of the other costs associated with buying a home, such as the home inspection fees and closing costs. However, before you begin looking for your dream home, you should sit down and go back over your budget. If this is your first time buying a home, then there's a good chance that you may not have considered all of the costs of owning a home.
There's more to homeownership costs than just your monthly mortgage payments. The following are seven hidden homeownership costs to keep in mind when budgeting for a new home:
Moving expenses - Just moving from your old house to your new house can cost a pretty penny. Moving costs are going to vary greatly depending on how far you live from your new home, what you are moving, how you are moving, and whether you are renting a small truck or hiring a moving service.
Property taxes - Those who have never owned a home before tend to compare the cost of their rent to the cost of mortgage payments. However, they are not being taxed for property they are renting. Property taxes differ from state to state and depend on the size of your property.
Homeowner's Association (Strata) fees - Always check to see if there is a homeowner's association governing your neighborhood. If there is, then you'll have to pay a yearly fee for their services -- a fee that is not optional.
Homeowner's insurance - Homeowner's insurance is more expensive than rental insurance, and for good reason -- there's more that you need to cover. If you are taking out a mortgage, then your lender will require that you buy homeowner's insurance. Even if you have the means to pay for a new home without borrowing money, bear in mind that homeowner's insurance is a must. You may also need to purchase extra insurance to protect against earthquakes or flooding if you are in an area prone to those events.
Maintenance - Simply maintaining your home is going to cost money. For example, you can't just let your lawn grow without cutting it on a regular basis. Even if you do this yourself, you're going to have to pay for the equipment to do so. Maintenance may also include preventative measures, such as removing tree branches that are too close to your home or having your HVAC system inspected.
Repairs - You might consider repairs as part of your maintenance costs. However, you can go years without having to repair anything, then suddenly have to replace the entire roof -- you never know. It's difficult to financially plan for repairs, but you have to be prepared to spend some money on them eventually.
Utilities - Don't just assume that your utility costs will remain the same as they were when you were renting. Odds are, the space you will be living in will be much larger, which means utilities are more expensive. There likely will be other utility costs to consider as well, from watering the lawn to operating the garage door.
The process of buying a new house can be quite expensive in itself, but it's important to be aware of these seven hidden homeownership costs as well when going over your budget. The last thing you want to do is buy a home and realize too late that you can barely afford to live there.