Now that the property prices are starting to come up again after hitting multi-year lows, many Americas are planning to buy a home of their own. However, owning a home is not an easy affair as it seems to be. People in general have an impression that a home costs only the price, which happens to be the biggest fallacy. There are numerous other expenditures associated with owning a home. Such major costs are discussed ahead.
Inspection and appraisal fees
The expenses start before you actually purchase a home. It is necessary to get a property inspection done to find out if the house is worth purchasing. For this you will need to avail the services of a home inspector.
Although not compulsory, it is advisable you get a pest inspection done to check if the house is infected with wood-eating termites or other nuisances like mice, cockroaches or bed bugs.
Property appraisal is an important activity from the point of view of your lender, in case you are planning to take out a mortgage loan. The lenders will need you to assess the value of the property in order to decide upon the amount of loan as well as the interest rate. Inspection and appraisal charges may run into a hundreds or thousands of dollars, and are supposed to be borne by the buyers whether or not the deal is struck.
These expenses crop up when the deal is struck and you the sign the documents. Closing fees comprise of recording and processing fees, underwriting and insurance fees, etc to name a few. Closing fees generally amount to 2-3 % of the mortgage loan, and varies from lender to lender. You can try to cut short these expenses to a certain extent by doing some research and choosing an appropriate lender.
Mortgage and the interest are just the tip of the iceberg. Many people often overlook the long term costs like property tax. Property tax is something that you will have to pay every year till the time you own a house. As any projects like building a new school or a town hall that may come up, authorities tend to increase the tax liability of the residents.
If you own a home it would be really foolish of you not to buy a homeowners insurance policy. Insurance premium is yet another element that will dig you a deeper hole of costs. If you think that you can save on insurance premium by purchasing an old property, you should know that the premium is higher for such properties. This is because the electrical, plumbing and heating equipment in the old properties are generally worn out and pose an increased risk of mishaps.
Owning a home in an area prone to earthquake, flood, tsunami or volcanic eruptions invite an extra premium for a separate hazard insurance policy.
Repairs and maintenance
If you are the owner then you can’t have anyone else to take the responsibility of the upkeep of your home. The repairs and maintenance, smaller or bigger, become your responsibility. You may need to get the fireplace chimney cleaned up, or get the roof repaired, get the furnace or fixtures replaced, or get the wiring done. The expenses of the equipment and the payment for the services of a carpenter, electrician, plumber, mason etc are to be borne by you.
To make the home look beautiful on the outside you may want to have paved sidewalks and driveway, elaborate lighting and a lavish entrance. You may want to get the landscaping done. It will include mowing of lawn, application of pesticides and weedicides, placing new plants and shrubs. These services cost you a lot. Even a simple monthly follow up will need you to lighten the pocket by a $100. Apart from your hard-earned money all these ongoing activities eat up your time that you could otherwise have spent with your family.
Owning a home may look very alluring. Before jumping at a decision of buying your own home, it is very crucial to educate yourself about the cost of owning one. This will help you judge if you can really handle it. The information and a right decision can save you from financial troubles in the future.