Hidden Costs of Homeownership and How to Prepare for Them
Closing on a new home is an exciting experience. If you’re like most homebuyers, you’ve probably been searching for quite some time to find a home that’s right for you. The excitement of this experience can lead to some buyers pushing their budget as time goes on, and not fully preparing for the added costs of homeownership. Owning a home comes with a lot more than just the price of the home, and it’s important that you’re aware of the additional costs that exist to prevent sticker shock.
Here are 7 hidden costs of homeownership to keep in mind
1. Closing Costs
When signing your final paperwork for your new home, there is an accumulation of fees that you need to prepare for. These fees range from processing fees to insurance fees, and they can quickly add up. Setting aside some extra money for these fees is necessary for homeowners. Closing costs typically range from 2 – 5% of the purchase price of your home so prepare for a few thousand dollars in these fees.
2. Inspection Fees
Before moving into your new home you’ll want to have it inspected. Inspection fees can range dramatically based on the area you’re located and the age of your home. On average, you can expect these fees to be between $250 – $400. However, if you’d like to have the home tested for specific hazards, like asbestos for example, these are additional costs.
3. Moving Expenses
Whether this is your first home or fifth home, you’ve probably accumulated belongings and furniture. You’ll need to consider whether or not to hire a moving service, or move your belongings with a rental truck. Whichever method you decide, there are costs associated with moving your belongings that you’ll need to keep in mind. These costs will vary based on distance and the size of the vehicle needed to fit your belongings, but they are often overlooked when purchasing a home.
4. Furnishing Costs
Furnishing a new home can be expensive. Especially if you need to fill a larger space with big furniture items like beds, couches, and table sets. When budgeting for a new home you’ll need to keep the cost of furnishing the home as a variable in your final purchasing price. You’ll want to leave yourself some wiggle room to be able to decorate the space you’re purchasing.
5. Homeowners Insurance
Another monthly expense to consider is homeowners insurance for your new home. Insurance pricing will vary based on the location of your home, your credit score and the level of coverage that you choose. You can expect an annual insurance premium to range from anywhere between $300 – $1000.
6. Location Based Fees
Depending on the location of your new home, there can be other varying fees. In some neighborhoods you will have a homeowners association that has membership fees. These fees will fluctuate from year to year based on what the community approves to put the funds raised toward. You will also need to be aware of how city taxes change based on your location. Cities that border each other can have vastly different tax rates, so be aware of where you fall on the map.
7. Maintenance & Repairs
When purchasing a home, you need to be prepared for the unexpected. Many homebuyers don’t expect the costs associated with maintaining a home and don’t allocate enough of their budget toward these costs. It is suggested that you will spend 1 – 4% of your home’s value on maintenance annually.
By budgeting for these hidden costs of homeownership, you can ensure that your buying experience goes smoothly. Based on these expenses, it is smart to set aside or negotiate an additional 8 to 10 thousand dollars into your final closing price. To avoid being blindsided by these hidden costs, it’s smart to consult with a realtor who will help you navigate all costs associated with purchasing a new home.
