Unanticipated Expenses of Homeownership: Brace Yourself for the Unexpected!
Title: What Owning a Home Really Costs: It Might Be More Than You Think!
“Yes, renting is simply tossing money away,” or so they say. Generally, people believe buying a home is a smarter financial move. But is this really the case?
We often accept common advice as absolute truth without thinking it through ourselves. The reality, however, is that being a homeowner can be quite pricey. While there are certainly benefits to owning a property, there are also drawbacks that are often overlooked.
Today, let’s delve into the hidden expenses of owning a home and get a clear view of the financial implications.
Background: A personal journey.
To add a bit of context, I’ll share my own journey with real estate. My wife and I bought our first home, a two-bedroom condo, in 2007, barely nine months into our marriage. Our plan was to live there for a while, then rent it out when we moved. Unfortunately, soon after our purchase, the property value dropped significantly.
In 2010, we sold the condo at a loss, relocated to an area with lower living costs, and bought a brand-new family home. By 2014, we’d paid off our mortgage, becoming debt-free. We intended to stay there long-term, but by 2016, we relocated again, this time for more space and privacy.
Now, we live in a bigger home that was almost 30-years old at purchase. We’ve experienced living in a small condo, a moderately-sized new construction, and a spacious older home. All these experiences have painted a clear picture of the costs and responsibilities of homeownership.
Let’s break down these costs:
1. Upfront Expenses:
Assuming a house costs $300,000, transaction costs hover between 2% and 5% of the price, in this case around $9,000. Also, the standard 20% down payment to escape the extra cost of private mortgage insurance (PMI) is a hefty sum of $60,000. Hence, the initial payment would total to $69,000.
2. Recurring Monthly Expenses:
Assuming a 30-year mortgage at a 4.5% interest rate, usual monthly costs would look something like:
– Mortgage payment: $1,216
– Property taxes: $500
– Homeowner’s insurance: $33
– Maintenance and upkeep: Approximately $375
– Utilities: Around $304
These projected costs might differ based on your specific circumstances, but they provide a basic benchmark, tallying to a monthly expense of $2,428.
But wait, there are hidden costs!
Here are additional expenses you might encounter as a homeowner:
– Security system costs: ~$30/month
– Housekeeping services: Varies but we can assume ~$200/month
– Lawn care: An estimated $60/month
– Pest control: Again, varies, but if required could be ~$50/month
– Snow removal: This could average to $20/month throughout the year
– Regular maintenance & repairs: Includes things like fixing appliances, plumbing, electrical work, etc.
These additional costs might not apply to everyone, but they could potentially add several hundred dollars to your monthly expenses.
In summary, owning a home carries a hefty price, be it a new construction or an older home. Sure, homeownership allows you to make improvements and personalize your living space as per your taste, but these often come with a high price tag.
The main takeaway is not to rush into buying a home because it’s considered the norm. Instead, thoroughly evaluate all the costs and consider your personal circumstances before making a decision. Happy house hunting!
Next up: Exploring ways to invest in Real Estate, without owning a house!
