October 2018

Hidden Costs of Owning a Home

Author: Brenda Blisk

So, you’re ready to buy a house. The costs of owning a home go beyond your mortgage payment. Have you included the “real” costs in your monthly budget? Now is a good time to pause and look more closely at the realities of homeownership.

Additional costs:
Private Mortgage Insurance
If your down payment is less than 20 percent, your lender will likely require you to carry private mortgage insurance (PMI). These premiums vary depending on your down payment and loan amount. Have the lender tell you how much more the PMI will add to your monthly mortgage payment.

Real Estate Taxes
Better known as property taxes, they vary state-by-state, county-by-county or city-by-city. Ask your real estate agent to go over how much the tax rate in your state or county is as a percentage of home value. Check online resource such as tax-rates.org. Don’t forget property taxes may be deductible on your federal income tax return; be sure to check with your CPA. Discuss with your real estate agent and lender what the PITI is on the property; otherwise your property taxes are due twice a year.

Homeowners Insurance
Unless you pay cash for your home, your lender will require a minimum level of insurance. This is not a place to skimp. You want to really protect yourself. It’s most important to insure your home’s “replacement cost,” not its current market value. Think, what if I have to rebuild my house in case of a disaster?

Liability insurance is also a must in case someone is injured on your property. I recommend you research and purchase an umbrella policy for additional protection. Not all policies are the same, and before you purchase, talk with your parents, trusted friends, and do some comparison shopping for pricing and consumer satisfaction. Helpful websites such as insure.com or jdpower.com can provide some basic information and ratings.

Home Owner’s Association Fees or Condo Fees
Is the new home or condo a part of a community which includes extras such as a pool, recreation facilities, fitness facilities or grounds maintenance? Then add this monthly cost into your budget of owning a home.

Major Repairs
Always have a home inspected as precondition to purchase. You may need to negotiate major repairs with the seller. Then be realistic about future home repairs. Will you need to replace the roof, the windows, remodel the kitchen and paint the exterior? When the house honeymoon is over, these things may seem more serious both aesthetically and financially.

Routine maintenance need not be major repairs, but a home requires regular yearly maintenance. A rule of thumb suggest you budget 1 percent of your home’s value, or $1 per square foot annually. Of course, the yearly maintenance depends on factors like location, weather, initial condition and age of the house or condition. Costs vary year-by-year, depending on what is needed. It is best to be financially prepared.

Keeping your home in good condition helps its street appeal, functionality and helps maintain its value for resale.

Buying a Fixer Upper or Buying Cheap
If you know you will be making a lot of improvements, start planning for those extra costs now. It is best to know the price tag upfront before you make an offer.

Owning a home is an ongoing financial commitment, so research the details before you make an offer. Know upfront what your obligations may be and plan in advance. This will help keep your dream home from becoming a financial nightmare.

Questions? Call today (703) 748-5828 or (800) 262-3458 for a complimentary consultation from a Barron’s Top Advisor Team: Blisk Financial Group.

Spire Wealth Management, LLC is a Federally Registered Investment Advisory Firm. Securities offered through an affiliated company, Spire Securities, LLC., a Registered Broker/Dealer and member FINRA/SIPC.

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