At a certain point in life, it will often make more sense to buy a home than to rent a space to live. This is especially true if the size of your family is continually growing.
There are many costs, though, that not everyone is aware of when it comes to homeownership.
Not sure where to start? Don't worry, we’ve got you covered.
Let's take a look at everything you need to know about the true cost of homeownership.
When thinking of home-related expenses, costs associated with maintenance often immediately come to mind. While most people likely won't be too inconvenienced by fixing a leaky faucet, things like roof repairs and air conditioner repairs can quickly prove to be costly.
So, you're going to need to budget for these situations.
Since the size of your home will often dictate how much you'll need to spend on repairs each year, it's recommended that you set aside between one and two dollars per square foot. For example, a 3,000 square foot home will likely need between $3,000 and $6,000 in repairs each year.
These are only estimated costs, though, and there's no guarantee you'll need consistently fix your home. But, setting aside money each month will ensure that you have the funds when you need them.
Even if you're bringing furniture with you during your move, buying a new home has a way of instilling a desire for new couches, chairs, etc. You'll also need to consider appliances, such as refrigerators, washers, and dryers.
While dishwashers are often included in the sale price of the home, there may not be a washer and dryer readily available when you move in. So, you'll need to budget to purchase your own.
When it comes to things like couches or beds for a spare bedroom, the purchases you make are mostly left up to taste. The same goes for smaller furnishings like coffee tables.
It's also important to consider the age of the appliances that already come with the home. A 15-year-old stove will likely need to be replaced within a few years of moving in.
For those who have rented in the past, homeowners insurance functions in the same way. But, you'll find that the cost is significantly higher due to the amount of coverage it provides.
Renter's insurance merely offers protection for your belongings in case of things like theft, fire damage, etc. Homeowner's insurance covers both you and your mortgage lender from risks associated with your property.
Additionally, you'll also need to have some form of coverage against natural hazards like hurricanes, tornadoes, etc. If you're in a designated flood zone, you'll also need insurance for this occurrence, as well.
Finally, you may also need additional coverage if you keep large-value items in your home, such as jewelry or collectibles. Expensive artwork, for example, is a possession that may require an extra policy to fully protect.
Homeowners Association (HOA) Fees
Some communities include ponds, pools, tennis courts, and gated entrances. These amenities don't come free, though, and you will end up paying for them through HOA fees.
Depending on what your community offers, this could end up being an extra $200-$300+ per month. So, keep this in mind when creating a budget for your new home— you don't want to be financially strained from your mortgage payments and then have to worry about these extra expenses.
The Costs of Not Owning a Home
While there are many costs associated with homeownership, there are also plenty of ways in which owning a home can save you money. Let's explore some of the most noteworthy.
Foregoing Tax Benefits
The interest you pay on your home's mortgage and the amount you pay in property taxes can be deducted from your total income, which will allow you to pay less money when tax season comes around.
For those who own particularly large and expensive homes, this deduction will likely prove to be significant.
Lower Net Worth
The more your own, the higher your net worth is. Since land is so valuable in itself, owning a house will drastically increase one's net worth (even if the home isn't that expensive).
The higher your net worth, the more financial power you have (and the greater capability you'll have to get through financial hardship).
Unpredictable Monthly Payments
One of the most significant benefits you'll find as a homeowner is consistency in monthly payments. While your HOA or insurance fees may fluctuate from year to year, the difference you'll pay is often negligible.
When renting a property, however, you may be notified by your landlord out of the blue that rent payments will increase. Since they're the property owners, how much they charge you is solely at their discretion.
For renters who already experience high payments, even a slight increase could be financially crippling. Homeowners only have to deal with a mortgage payment, and the monthly rate is decided at the time the home is purchased.
Additionally, the money you're paying is going toward ownership of the home as opposed to into your landlord's pocket.
Managing The Cost of Homeownership Can Seem Difficult
But it doesn't have to be.
With the above information about the cost of homeownership in mind, you'll be well on your way to handling your expenses and reaping the benefits.
Want to learn more about how we can help? Feel free to get in touch with us today to see what we can do.