The Costs Of Buying A Home You Shouldn't Forget

When buying a home, the mortgage is usually the first and largest expense that comes to mind. It’s the most significant financial commitment and, unless you’re paying in cash, one you’ll be repaying for many years. But beyond finding ways to reduce your mortgage payments, it’s important to remember that homeownership comes with a variety of additional costs. Below, we’ll explore these expenses and share tips on how to manage them effectively.

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Closing Costs

The downpayment might be the biggest expense out of the gate, but the closing costs can start to add u beyond that, as well. These fees typically range from 2% to 5% of the home’s purchase price and cover things like loan origination, appraisal, title search, and attorney fees. A lot of people find themselves caught off guard by just how much this particular expense can add to their budget, especially if they’re focused solely on the down payment. Lenders can provide an estimate, typically quite early in the process, but you should make sure that you have roughly 5% of the overall mortgage set aside from the moment that you start applying, beyond the down payment that you’re already expected to have.

Moving Expenses

It’s easy to overlook how expensive moving can be. Whether you’re hiring professional movers or renting a truck and doing it yourself, costs can escalate with distance, the number of belongings, and even the season. If you’re moving during spring or summer, then you can expect to pay more, as most people move during the sunny periods of the year, and the increased demand also means an increase in price. If you’re moving everything yourself, you have to account for packing supplies and storage fees, while hiring professional movers might come with costs if you want them to complete furniture assembly for you, as well. If you’re relocating across state lines, the price tag can reach into the thousands.

Property Taxes

How much you can expect to spend on your property taxes is going to vary widely, depending on where you live. However, wherever it is, you should do your research and get a good idea of how much you can expect to pay. These taxes are based on the assessed value of your property and fund local services such as schools, police, and road maintenance. In some areas, the annual bill can rival a small mortgage payment. Your mortgage lenders will typically roll taxes into your monthly payments, but you should make sure that you’re accounting for them, all the same, so you’re not paying more than you think you are. Taxes can affect just how affordable your chosen home will be in reality.

Home Insurance

While home insurance technically isn’t mandatory, if you plan on buying your home with a mortgage, most lenders are going to require that you have one. Even if you’re able to sidestep that requirement, it’s still a good idea to protect yourself financially in the event of property damage or loss. Home insurance policies typically cover damage from fire, theft, storms, or other disasters, along with liability if someone gets hurt on your property. While premiums vary, factors such as location, home value, and coverage levels all influence the final cost. Make sure that you know what kind of requirements your lender has, as some might have specific coverage minimums. Depending on where you live, you might want to budget for extras such as earthquake or flood protection, as well.

Homeowners Association Fees

Although this is not going to apply to everyone, a lot of people find themselves caught off guard by how much they have to pay the homeowners' association. This only counts if your property is part of an HOA community with shared amenities, and typically covers things like maintaining common areas, landscaping, pools, gyms, and even security. Depending on the neighborhood, HOA dues can range from modest to surprisingly high, and they’re non-negotiable. Make sure that you get an idea of not just how much HOA fees are going to cost you, but what they are going to cover in return. There may be optional costs in there that you can opt out of, or agree to, but if you’re living in an HOA community, you’re going to have to pay something, at least.

If you’re buying a property in the UK, you’ll need to pay Stamp Duty, which can add a significant cost to your purchase. Tools like this stamp duty calculator from The Mortgaged can help you estimate how much you’ll owe based on the property price and location, so you can plan your budget more accurately.

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Utilities And Services

Although you might already be paying for utilities and services wherever you are, a lot of homeowners find themselves caught off guard when moving to a new place increases the prices. This is also true if you have a larger home. Heating, cooling, water, trash pickup, internet, and electricity all add up quickly. Additionally, you may need to set up new accounts, pay deposits, or purchase equipment like a router or trash bins. Take the time to research the cost of living in the area you’re moving to, or get more specific and ask the previous homeowner if you can see their own most recent utility bills for a broad estimate of how much you should set aside in your budget.

Maintenance And Repairs

Ensure that you take the time to fully and thoroughly inspect the property before you decide to buy it. So long as the seller isn’t hiding anything, any fixes that the home requires are the deal is complete, are you responsibility to deal with. Typically, you want to set aside between 1-3% of the home purchase price annually to deal with maintenance and repairs. Older homes naturally are likely to require more work, but even new homes require some attention, from lawn care to pest control and gutter cleaning. Taking a proactive approach to upkeep also helps preserve your home’s value and prevents small issues from becoming big financial headaches.

As the most expensive asset that most people are likely to own, the home deserves a lot of financial preparation. You just need to make sure that it goes beyond how you pay off the mortgage as well. Don’t miss anything in your budget.