If you ask someone what homeownership means to them, they would most likely talk about the stability, security, and accomplishment of owning a home. Indeed, in today’s world, it is exciting and fulfilling to be able to buy a house/apartment. But homeownership means more than just buying. It is more about whether you can keep it or not. Many people, especially first-time homebuyers, see only the price when buying a home. The truth is, however, that homeownership involves so much more than that.
In addition to what you pay the seller, you also have to cover legal fees, inspection and appraisal fees, not to mention moving costs. On top of that, there are a lot of hidden costs of owning a home. That does not mean, though, that owning a home is a bad idea. There would always be hidden costs, whether you rent or own. Our job here at RealtyHop is to help you understand what these costs entail so you can be truly prepared for homeownership.
Below are 10 hidden costs of owning a home any homeowners need to be aware of:
1. Co-Op and Condo Fees
If you own a single-family house, you are lucky. For those who own a condominium (condo) or co-operative (co-op), we feel your pain. Co-ops and condos charge fees on a monthly basis, and these fees are commonly known as maintenance fees or common charges. These fees can be as high as $700 per month, sometimes including utilities and sometimes not. If you are considering buying a condo or co-op, be sure to check with the building first to see how much that would cost you.
2. Pest Control
First-time homeowners often neglect pest control, especially when it comes to wood destroying insects such as termites. Hey, this is no one’s fault. When you rent, extermination is well taken care of by the landlord. However, now that you own a home, you will have to budget for pest control. Based on your needs, you can either schedule a one-time pest control (which includes inspection and extermination) or do it on a monthly or quarterly basis. One-time visits are usually more expensive.
3. Property Taxes
Once you are done repaying the mortgage, you are done with the heaviest burden of homeownership. Sounds easy enough, right? But, let us not forget about property taxes. So long as you own a home, you are subject to property taxes, which can be scary for first-time homebuyers. Depending on where you are, your property taxes can be surprisingly high, since many municipalities in the U.S. rely heavily on property tax collections (New Jersey is one perfect example).
4. Homeowners Insurance
Homeowners insurance, also known as home insurance, protects your home and possessions in case of incidents such as natural disasters, fires, theft or other incidents. While it is true that you do not necessarily have to have a home insurance policy in place, if you finance your home with a mortgage, 99% of the time your lender will require you to purchase home insurance. The cost of homeowner insurance varies depending on the home value, property type and where you are located. The average cost in New York is around $1,200 per year.
5. Home Improvement and Decorations
Whether you own a brand-new property, or an existing home, decoration and home improvement is a big part of homeownership. You might want to repaint the walls every couple of years or change the window curtains and lighting based on the season. As you take on new home projects, it is very important that you budget for it in advance. Figure out how much you can do by yourself, and how much help you need from contractors.
For our tech-savvy homeowners out there, please remember to plan for home automation as well. Indeed, home automation, in the long run, saves you lots of money and time, but to have everything set up, it can cost a fortune. Since home automation can be addictive, better set up a spreadsheet to track everything you have purchased before you realize you have spent too much. (I, the writer, for one, have learned my lesson as I explored Alexa, EcoBee and LED Hue lightbulbs).
After finally packing up everything, moving them to the new home, and unpacking, you realize that the rug you cherish the most does not work in the new living room, at all. Your antique dresser also seems a bit out of place and putting it in the master bedroom is no longer an option…. Furnishing can be very costly, more than you can imagine, especially if you are moving from a smaller space to a big apartment/house.
7. Lawn Care
City dwellers can be relieved now – as you pay for high condo fees/common charges, finally there is one thing you do not have to cover, and that is lawn care. To get a shiny, green, weed-free lawn, one has to put in a lot of effort, and of course, dimes. Maybe you hire someone, or maybe you DIY. But doing it yourself does not mean that it would be absolutely free. Maybe you need to buy a new lawnmower, hedge trimmers, rakes, gloves, and maybe even fertilizer. Be sure to set money aside for lawn care regardless of which approach you take.
8. Utility Bills
The utilities are another expensive thing that gets excluded during the home-buying process. Usually, the bigger the home is, the more expensive your utility bills get. To get a better understanding of the expenses and properly budget for it, you can ask the seller for their monthly utility bills, or ask your neighbor next door how much they spend on keeping their home warm, etc.
If you live in a condo or co-op, congratulations! Hidden cost #9 might not be as big of a concern in your life, as the common charges or maintenance fees already cover it all. If you own a house, maintenance can be tricky. Maybe you have a pool, maybe your gutters get clogged easily, or maybe your roof needs some love every once in a while. Most homeowners know the importance of maintenance, but that does not mean we all know how expensive and time-consuming it can be.
10. The Expected and Unexpected Repairs
Last but certainly not least, repairs. If your home is in a not-so-great condition, chances are that the contractor you hired for the warped bathroom would spot a more serious leaking problem. You might be very good at tracking issues and scheduling repairs, but hey, that does not mean that you are ready for the unexpected.