Being approved for a mortgage is the first hurdle many homebuyers will have to become homeowners. While this is a big success in itself, this is just one of the costs you will have to account for as you take on the responsibility of homeownership. If you had rented before buying the home, your monthly rent might have included the costs of taxes, property repairs, and even some utilities. When it comes to homeownership, you don’t have the same easy payment to cover all your bases, and there are different costs beyond your mortgage. With a bit of preparation and foresight, you can easily adjust your budget to make sure you are ready for various expenses in the short term and down the line of your homeownership.
Whether you decide to enlist your friends to help move your belongings into the new home or opting to hire professional movers, you will need to cover these costs. Choosing to do it yourself with friends is the cheaper option, but you will likely still need to rent a truck, purchase packing materials and provide food and refreshments for your friends. On the other side, hiring professional movers will be more expensive, but they will be faster and more efficient. You would have less to worry about on move-in day by opting to go their route, as the movers will likely be covered by insurance through their company if an accident were to occur. Insurance coverage is just one of many factors to consider when hiring professional movers, and it’s essential to do your due diligence and find the right company for your needs.
For many moving from an apartment into a home, the new home is often a larger space. In these instances, new homeowners will want to fill the additional space sooner rather than later. Others may want a clean slate and opt to donate, sell, or throw away some old furniture and buy pieces specifically for their new home. The cost of furnishing your new home will be different for each situation and how much money the homeowners have to spend on it. Remember, it doesn’t all have to be brand new, and DIY projects can be fun to refresh old pieces to fit your new space better.
The same ideas go for new appliances as they did for new furniture. Some larger appliances that are essential, like ovens and dishwashers, are considered fixtures and are included in the home’s sale. Other appliances that are mobile, like washers, dryers, and refrigerators, may not be included. Unless the seller is throwing them in with the sale, you will have to buy your own.
As mentioned earlier, some renters will have had utilities included in their rent. When moving from an apartment into a home, you will be responsible for all utilities. That means your electricity, water, natural gas or oil, internet, cable, and trash. Again, with a larger space, the homeowner may notice a higher cost to heat and cool their homes during the different seasons. Some utility companies offer plans to “equalize” the invoicing that accounts for increased usage during colder and warmer months, allowing you to predict your costs better and budget accordingly.
Homeowner’s insurance is not required by law. You will most likely need to get coverage when during the process of obtaining your mortgage. Homeowners insurance is for your benefits as well. It protects your home and property in case of any incidents: fires, thefts, accidents, or natural disasters, or similar “act of God.” Depending on the geographical region of their home, homeowners should be aware of regional concerns (floods, earthquakes, wood destroying organisms) and ensure that their policy included additional coverages if necessary. Be sure that your policy covers the cost of rebuilding and refurnishing your home.
Property Taxes are another expense that will be new to first-time homebuyers. Your specific property taxes are determined by the county you live in and the assessed value of your home. For some, property taxes may be included in your mortgage, but for others, you will receive an annual bill. In that case, you may find it easier to set aside some money each month rather than pay for the lumps sum all at once.
Homeowner Association Fees
Not applicable to all homeowners, but if the neighborhood you are moving into has a homeowner’s association, you will have to pay the HOA fees, usually monthly or annually. HOA fees are determined by the community’s services or amenities, ranging from the more practical such as garbage removal or lawn maintenance to the more luxurious such as pools and guarded gates. Ultimately, the more features included with the HOA, the higher the dues will be.
Maintenance and Repairs
Routine maintenance is one of the primary responsibilities of homeownership. Proper maintenance can help maximize the working lifespan of your home’s various appliances, systems, and structures. Keeping on top of it can increase your home’s value over time and help you catch any issues earlier while being less invasive and cheaper to fix. Issues left unattended in your home aren’t going anywhere and will often grow into more significant problems when left unfinished.
For routine maintenance, there are two common ways to calculate your budget:
- 1%-4% of your home’s overall value each year.
- $1-$2 per square foot of your home per year.
Setting aside a yearly budget dedicated to maintenance and repairs is a good starting point. Some years you will spend more on the required maintenance or start more home projects, while other years, you will have fewer maintenance costs to cover. The point is always to be sure you have the money to cover the costs and ensure your home is well maintained.
At some point as a homeowner, you will undoubtedly experience an unforeseen incident that results in a costly repair or replacement. Even with the best maintenance routine in place, life is sure to throw a few curve balls at you. It’s best to have a nest egg devoted to these sorts of emergency repairs when they come up. It is wise to keep this money separate from your routine maintenance fund to ensure that it is devoted exclusively to these surprise events.
Preparing for Homeownership
Understanding all the costs of homeownership beyond the mortgage is an excellent way for first-time homebuyers to prepare for the responsibilities associated with their new home and avoid as many surprises as possible along the way. Remember that your home inspections provide information about the condition of the house and its specific systems and components, which allows owners to have a better idea of what expenses they can expect down the line. The inspection report is also a great source to reference, which will give you the best view of what repairs or replacements will be needed and when to expect them, so you prioritize your maintenance and repairs plans.