Know Your Costs of Home Ownership

Jun 28, 2013

By Staff Writer State Farm™ Employee

As with many major purchases, there can be hidden costs when buying a home. But these buried expenses don't stop once the papers are signed and you have the keys. You also need to think about how much it's actually going to cost to live in your new home; mortgage payments are only one part of your expenses.

You also need to budget for taxes, insurance, maintenance, utilities, yard work, repairs, and other costs. Be realistic when calculating for these expenses, they can really add up.

Fixed Costs

  • Utilities. Consider gas, electricity, water and sewer, trash pickup, phone, Internet, and cable. The cost for an entire house can be significantly higher if you're moving from a smaller place. While it's hard to estimate the cost of utilities, you may want to request the present homeowner's utility bills for the past 12 months to get an accurate picture of energy costs throughout the year. Also, keep costs down by making your home more energy efficient.
  • Property taxes. Property taxes are based on the value of your home, so the more expensive your house is, the more you'll have to pay. Although taxes vary widely across the country, you can use a property tax estimator to get a rough idea of what to budget.
  • Insurance. Insurance premiums vary depending on where you live and a variety of other factors, including the size, type, and age of your house. It's up to you to choose the coverages and limits that meet your needs, but it's best to insure your home for at least 100 percent of its estimated replacement cost (the cost of repairing or replacing your home to restore its original condition).
  • Homeowner fees. Many townhouses or condos have homeowner association (HOA) fees. Some of the costs covered can include exterior and interior maintenance, landscaping, water, sewer, garbage, parking lots and courtyard sidewalks, and lawn care. One-time special assessments may also be levied to pay for emergency repairs or extensive improvements.

Variable Costs

  • House repair and maintenance. This can include anything from minor touch-ups to major repairs. Cleaning and repairing of gutters and chimneys, interior and exterior painting, roof repair, fixing electrical systems and plumbing, and pest control are a few of the tasks to consider. While expert opinion varies, estimate spending between one to four percent of your home's value annually on maintenance and repairs. You should budget for items like water heaters, which on average last only 8-12 years. When they fail, they can cause major water damage. They need to be replaced before a catastrophic water loss occurs. For a $200,000 home, you may want to budget $2,000$4,000 a year. If you need to hire someone to do the work for you, be aware of possible home repair scams.
  • Yard care. Mowing, edging, seeding, trimming, fertilizing, watering, weeding, planting flowers and shrubs, re-sodding, and removing snow can all add up whether you do it yourself or hire a professional.
  • Appliances. Chances are most major appliances will come with the house, but this is not always the case. You may have to provide (or replace) the refrigerator, stove, microwave, dishwasher, or washer and dryer.
  • Remodeling. Redoing floors, opening up rooms, renovating kitchens and bathrooms, or adding square footage can improve the quality and value of your home, but the costs can add up quickly. You may want to prioritize the most important updates and budget for them over several years. Be sure you select a reputable home contractor to help you.

Owning a home can be a great investment personally and financially, so don't let all of these hidden costs get you down. Now that you know some of things to look out for, you can be realistic about the time and money it takes to own and maintain a home.

The information in this article was obtained from various sources. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. These suggestions are not a complete list of every loss control measure. The information is not intended to replace manuals or instructions provided by the manufacturer or the advice of a qualified professional. Nor is it intended to effect coverage under any policy. State Farm makes no guarantees of results from use of this information. We assume no liability in connection with the information nor the suggestions made.

Sources:

Fizber Property Tax Estimator: http://tax.fizber.com/
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