Beyond the mortgage: Other costs for homeowners
Learn about the costs associated with homeownership aside from your mortgage so you – and your pocketbook – are prepared.
It’s a truth you can’t avoid: A mortgage is hardly the end of a homeowners’ monthly bills. In fact, additional homeownership costs average $9,000 annually, according to a study by Zillow and Thumbtack. To help you prepare, we’ve compiled some other key expenses to keep in mind when crafting a realistic monthly budget as a new homeowner, including contributions to a dedicated savings fund that can help you stay financially secure through it all.
1. Tax and insurance
You’re probably aware that your monthly mortgage payments target some principal, or initial loan amount, as well as interest on what you borrowed. But don’t forget to factor in two other expenses: property taxes and homeowner’s insurance.
Your property taxes include annual fees for local municipal services, maintenance and salaries, which can vary greatly from community to community. If escrowed, they would be broken up into installments and paid through your mortgage holder.
Homeowner’s insurance is usually required by your mortgage company to protect their asset (aka your home). And if you put less than 20 percent of the total purchase price down on your home, you’ll likely pay Private Mortgage Insurance, or PMI, too. This is to ensure that your lender still nets some cash if you stop paying your loan. It’s absolutely possible to buy a home with a smaller down payment, but if you do have at least 20 percent available to put down, that could turn out to be a real money-saver in the long run.
2. Household necessities and maintenance
It’s easy to underestimate how much you’ll spend at the outset on everyday items that help your home run smoothly. A whole home’s worth of cleaning supplies really adds up, not to mention rugs, shower curtains, garbage cans, organizational helpers, tools and all the many other items that help keep your new home running smoothly.
General maintenance and upgrades are an ongoing expense, too. Think: Furnace filter replacement (every three months!), high-efficiency light bulbs, seasonal HVAC inspections, chimney cleaning, appliance upgrades and more. It all adds up, so be sure to budget accordingly.
3. Curb appeal
Your home likely contains some combination of a lawn, walkway and driveway to take care of. Depending on where you live and your commitment level, that means accumulating and maintaining certain tools, such as:
You may also want to set aside some extra money for gardening and landscaping costs. (This can include everything from plants, mulch, containers, decorative edging and more.)
Then there’s the exterior of your home. Beyond optional primping, like an eye-catching door color and cheery window boxes, you’ll want to consider siding that may need to be repaired and fences that may need painting. You’ll need to clear your gutters yearly, and perhaps stain your deck and pressure wash your patio, too.
4. Interior decorating
Only you can determine your accurate monthly budget for this category, loosely connected to the age and state of your home as well as your HGTV viewing habits and tendency to wander down the Pinterest rabbit hole. From hand towels, rugs and throw pillows to the latest kitchen or home-tech gadget, surely low-key comforts will sometimes show up on your monthly shopping list.
When you start thinking about big-ticket items such as furniture, floors or wall coverings, as well as additions or remodels, it’s time to save or look into a home equity line of credit, which lets you tap into your home’s value for improvements to increase it.
The sooner you come to terms with the fact that out-of-the-blue expenses are just part of being a homeowner, the better off you’ll be. Pipes burst. Storms damage roofs. Squirrels take up residence in attics. Though you can’t control nature, or the effects of use and time, you can save up monthly for any surprise they’ll eventually spring on you. Have a dedicated savings account for home emergencies in particular, and you’ll rest easy knowing the money’s ready and waiting to do its assigned job.
However you finance these household costs, plan ahead and factor them into your budget so you’re financially prepared to invest in your home and address whatever it needs. Remember, homes offer return on investment when treated right.
A mortgage loan officer is a great person to have by your side to help you navigate from beginning to end. Get connected with a mortgage loan officer today.