The Top Unexpected Expenses

money-house

By Christopher DeGroot

Everybody knows that buying a home is expensive. What they don’t know is that this huge purchase comes with all sorts of unexpected additional costs. But by being knowledge about the most common ones, you will be better prepared to manage this significant investment.

Taxes

It is common to think, with some frustration, “I’m paying $1,300 in rent, but for the same amount, I could be paying a mortgage and own my own home.” This, however, is a simplistic point of view because if you’re only factoring in the principle and interest rate into your mortgage expense, you’re omitting a crucial part of it from the very beginning: property taxes. So, find out what the taxes are beforehand, then divide that amount by 12 and add it to your estimated monthly payment. Now you will have a wholly accurate figure.

Also, know that the taxes are going to continue to rise; you might even get a tax increase in the first year you own your home. So, be sure to budget accordingly.

Insurance

Another considerable expense is homeowner’s insurance, which your lender will require and which is in your own best interest as well. The cost will vary, of course. One common determinant is the age of the home. It will cost more to insure an older one since the outdated plumbing and electrical wiring are more prone to problems.

Know, too, that insurance companies, ever keen on protecting their interests, can periodically check your credit score and raise your rates according to their assessment of your risk level.

Finally, if you live in a flood zone, earthquake zone, tsunami zone or volcano zone, you’ll have to pay extra for hazard insurance.

Landscaping

It will cost about $100 or so a month to pay someone to cut the lawn, and another $100 for weed killer, pest control and fertilizer. Not to mention whatever you choose to spend on new trees, bushes, flowers or fencing, and so on.

Of course, you may decide to do all this yourself in order to save money, but that is still going to cost you. Now you’ll have buy a lawnmower, weed whacker, hedge trimmers, a hose, sprinkler, rake, and so on.

Additions

Any addition or improvement you make, whether it’s a shed, deck, kitchen renovation or expansion of your master bedroom, is not only going to cost you for parts and labor (which can run into the thousands); it’s also going to make your taxes go up each year. So, be aware of this as you consider adding on to your place.

Maintenance and repairs

Unexpected maintenance costs are rife. You will have to repair the appliances, fix any plumbing leaks, replace filters, seal your doors and windows, drain the water heater, and clean the chimney. Not to mention, patch the walls, replace the toilets, repaint whatever needs it, restain the floors, or replace the carpet and regrout the bathroom.

Outside, expect to reseal the driveway, restain the deck, clean the gutters, repair and eventually replace the roof, repair any cracks in the siding, patch the front steps, and on and on.

Though maintenance tasks can be relatively predictable, the most expensive part of owning a home is unexpected repairs; for example, replacing or repairing the roof, fixing loose tiles in the shower, removing an overgrown or dead tree, or paying for mold mitigation in a damp basement.

The list of possibilities is endless, so the best thing homeowners can do is to set aside savings for an emergency. Some financial experts suggest budgeting for 1% or 2% of your mortgage balance as a yearly maintenance and repair fund; but the amount you save depends on the age, condition and size of your home.

Inspection and Appraisal Fees

Before you purchase a home you must pay for a home inspection, an appraisal, and in some cases additional inspections for pests or radon. The costs of these inspections are borne by buyers and are a necessary protection to avoid buying a flawed property or paying too much.

Closing Costs
Some buyers are able to negotiate with the seller for a contribution for these costs, but buyers still must prepared with the cash for anywhere from 2% to 4% of the mortgage balance, depending on your area.

So, while you can be sure that your investment in your home is bound to cost more than you expect, by being well-prepared you can save yourself lots of stress and, of course, budget your money accordingly.