When purchasing a new home, many home buyers think coming up with a down payment is the greatest money hurdle, but with a new home comes other expenses that one may overlook. This week we’ve come up with four additional housing expenses and how to handle them.
If you’re buying a home for the first time or upgrading, you’re most likely aware that you’ll need to adjust your budget accordingly to fit your new mortgage payment. However, also consider budgeting for additional monthly home expenses that may go up. These expenses include, but are not limited to, heating and cooling, electricity costs, garbage, water, etc. Maybe you have a larger lawn to care for, or other larger expenses than your previous home incurred. Spend the time updating your budget and forecasting the associated costs.
You’re probably aware that your new home will come with some maintenance and repair costs but you may not realize the extent that these could end up costing. Most homeowners tend to spend between 1% and 4% of their homes’ value each year on these costs. Make sure you pad your savings account for these costs plus the big repairs that can occasionally pop up, like a new roof or a new heating system.
Property taxes are based on the assessed value of a home, couple with local tax rates. When you buy a new home, you’ll be advised of your current property tax bill, but that number always rises. Property taxes rise, even when home values drop. To protect yourself, leave some wiggle room in your budget so if you’re hit with a property tax increase, you’ll be prepared.
Some people consider rolling their homeowners’ insurance and property taxes into their mortgage payments via an escrow system. However, not all mortgages work this way. Make sure you’re aware of all the details surrounding your mortgage when setting up your budget. Many homeowners pay property taxes quarterly, so instead of being surprised every 3 months when the bill comes along, consider budgeting it out monthly and saving it so you’re ready.
Anticipating these additional costs when budgeting how much home you can afford will save you surprise and a headache down the road. By setting aside money to cover all associated costs, you’ll be prepared to cover all costs related to owning a home.