If you are considering buying a home, you are thinking about a lot of different things. Becoming a homeowner is a great way to build wealth by owning an incredible asset. Owning a home has several advantages. In most housing markets in the US, owning a home is cheaper than renting. Before you jump into homeownership, you need to know what the main big expenses will be so you can plan financially.
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Top 5 Homeowner Expenses
#1 Your Mortgage Payment
This may seem obvious to most, but it is the top expense. Most buyers get a mortgage loan to purchase their first home. To pay back this loan you will make a monthly mortgage payment that will likely be your largest bill. Unless you buy your home with all cash, you will make this payment and some of it will go towards the principal while other parts of it will go to the interest.
#2 Property Taxes
Every year you will have to pay property taxes on your home. Your property taxes will carry depending on where your home is located. Your property taxes can be lumped into your mortgage payment if you are paying into an escrow account that covers this. Your lender funds the payment on your behalf when this payment is due.
#3 Homeowners Insurance
If you have a mortgage on a home then you will be required to maintain a homeowners insurance policy. It is important to maintain this even if you buy your ho outright too. Homeowners insurance will help cover you if something catastrophic happens like a fire or flood. Your insurance payment will be made monthly and can be lumped into your mortgage payment as well.
Greg Kennedy of Calgary Homes for Sale suggests, “Make sure you understand what your policy covers because not everything is covered. You want to check that you have flood insurance if you live in a flood-prone area. Consider all that you own and the additional buildings on your property too. The last thing you want is to find yourself in need of your homeowner’s insurance and then learn that you don’t have proper coverage.”
Monthly utilities will need to be paid whether you are renting a home or owning a home. You will need to pay for your electricity, water, cable, and internet. When you buy a home, you will also need to consider your trash, sewer, and maintenance fees as well. Be sure you budget for all of these things.
#5 HOA Dues
If your new home is purchased in a neighborhood or community, then you will likely have to pay a homeowners association fee. These fees can vary depending on our location and the community’s size and amenities. These fees help to cover community amenities such as a pool or fitness area. They also can help cover the maintenance of the neighborhood landscape.
As you prepare to buy a home it is vital to understand all the financial responsibilities you will have. It is better to save a little longer than rush into the process. It is a big responsibility, but it is very rewarding when you get those keys in hand.