Generation Home

Purchasing a home is no small task and certainly isn’t the cheapest life choice. For most of us, it’s the single largest purchase we’ll make in our lifetime and arguably the most important (next to a car and education)! 

With such an important purchase, it’s important to be diligent and know exactly where your money might be going! In my experience as a real estate agent, the costs associated with owning a home aren’t always clear…

…Most of us understand the down payment as an “out of pocket expense,” yet weren’t taught the breakdown of monthly mortgage and interest payments…

…Or we’re pretty sure we need savings for future repairs and maintenance, but no one told us that monthly insurance payments or property taxes could increase as well! 

These costs can really add up, so it’s important to keep track of what’s at stake and what opportunities we have to save when purchasing and owning your home. This article helps you do just that! I’m giving you the lowdown on the “hidden costs” of homeownership to help you make an informed decision moving forward! 

We’ll follow a young couple, Chels and Daniel, full of excitement and anticipation, ready to take the plunge into homeownership!  As their real estate agent, I’m guiding them (and you!) through the process, making sure they understand the overt and covert costs that come with buying a house. 

P.s. Stick to the end for a free tool to help you stay on track of hidden costs and save on them as well!

Chels and Daniel had diligently saved for their down payment and were prepared for the big-ticket items like the loan origination fees ($1,500), appraisal fees ($500), title insurance ($1,000), attorney fees ($800), inspection fees ($400), and recording fees ($200). In total, their overt closing costs came to about $4,400, a substantial but expected sum.

After they moved into their new home, the couple began to uncover the hidden costs that can catch first-time homebuyers by surprise throughout the first couple of years..

Property Tax Increases: Initially, their property taxes were manageable at $2,500 per year. However, after a neighborhood re-evaluation, their annual property taxes jumped to $3,000, putting an extra strain on their budget.

Homeowners Association (HOA) Fees: The community had a Homeowners Association, which maintained the common areas and amenities. The HOA fees were $100 per month, adding up to $1,200 annually.

Renovations and Upgrades: Chels and Daniel invested $10,000 in renovating their kitchen and upgrading the bathrooms, a significant but necessary expenditure. (Using the suggestions on my handy “Cost of Home Ownership” spreadsheet, they were able to save on appliances!)

Insurance: Their homeowners insurance, originally quoted at $1,200 per year, rose to $1,500 when they added extra coverage for natural disasters common in their area.

Outdoor and Exterior Costs: Maintaining the exterior of their home required regular attention. They spent around $600 annually on lawn care and garden maintenance.

Energy Efficiency Improvements: To save on utility bills, they invested $3,000 in energy-efficient appliances and better insulation. While these improvements would pay off in the long run, the upfront costs were considerable.

Miscellaneous: From new furniture to basic home supplies, miscellaneous costs added another $2,000 to their expenses.

Emergency Fund: Chels and Daniel quickly realized the importance of having an emergency fund. Unexpected repairs, like fixing a leaky roof ($800) and a broken water heater ($600), highlighted the need for setting aside money for unforeseen expenses.

Understanding these hidden costs, Chels and Daniel sought a better way to manage their finances. They turned to a comprehensive spreadsheet I provided, which helped them consider all potential costs of homeownership. This tool became invaluable for estimating expenses and tracking their expenditures, providing a clear financial overview and aiding in better budgeting and preparation. You can view and use the same spreadsheet here.

The spreadsheet also included helpful suggestions for lowering these hidden costs. For example, Chels and Daniel used one of the tips to cut costs by performing regular DIY maintenance to prevent major repairs. They learned how to properly winterize their home, saving on heating bills and avoiding costly repairs due to cold weather damage!

In conclusion, while the costs of buying a home are significant, the hidden costs can be equally impactful. Chels and Daniel’s journey underscores the importance of thorough financial planning and being prepared for the unexpected. The spreadsheet they used is not only beneficial for first-time homebuyers but also for long-time homeowners to track their expenditures, ultimately helping to maintain a balanced budget and enjoy the true value of homeownership.

Get the Spreadsheet: https://mailchi.mp/0c858ee54064/1a12ski572

Contact me for all your real estate questions, referral tips, or help purchasing or selling your next home! https://scholachioma.com/real-estate/

——

Sources: BankRate Study: https://www.bankrate.com/f/102997/x/ce71debe80/hidden-costs-of-homeownership-press-release-1.pdf

Hidden Costs of Homeownership Chels and Daniel’s home buying journey Real estate tips First-time homebuyers guide Costs of owning a home Homeownership expenses Budgeting for a new home Property tax increases Homeowners Association (HOA) fees Home renovations and upgrades Homeowners insurance costs Energy efficiency improvements Emergency fund for homeowners Real estate agent advice Financial planning for homeowners Real estate spreadsheet Estimating homeownership costs Managing homeownership expenses Saving on home expenses DIY home maintenance tips Comprehensive homeownership guide Budgeting for unexpected home repairs Homebuying process tips Financial overview for homebuyers Long-term homeownership planning Home buying tips and tricks First-time homebuyer spreadsheet Real estate investment Maintaining a balanced budget Real estate consulting Purchasing and selling homes