After 42 years of living life in other people’s houses, I took the plunge and bought a home. For years, I rented (nothing wrong with that at all). For the last decade (plus one year), I worked in jobs that provided housing (3 years as a minister and 8 years at a residential care facility).
There are a plethora of studies out there comparing the benefits and pitfalls of renting versus buying. I’m not here today to add to that debate. However, once a purchase is made, what is next?
You’ve spent months — years even — saving up for a down payment for a house. You’ve budgeted meticulously, banking savings whenever you could to make homeownership possible.
After reaching that goal, you may feel like the pressure to budget and save is gone. But don’t get too comfortable.
Owning a home introduces a new set of expenses. Plumbing repairs, anyone? Taxes, fellow Americans? There’s more to homeownership than simply paying a mortgage instead of rent.
Here are eight homeowner expenses you’ll need to include in your budget.
Cities and counties tax homeowners to help fund schools, road improvements, and other public services. Your taxes are based on the millage rate and the assessed value of your home.
Property tax information is a public record, so you can look up how much previous owners were taxed in the past. However, keep in mind taxes can fluctuate from year to year as home values and millage rates change.
Many lenders fold tax payments into a homeowner’s overall mortgage payment. The portion of your monthly payment that goes toward your taxes is held in an escrow account until the bill is due. This takes the pressure off the homeowner to budget for taxes each month.
If your mortgage doesn’t include escrow payments for taxes (or you don’t have a mortgage), you’ll want to set up a similar, risk-free account where you deposit one-twelfth of your annual tax bill each month to save up.
Homeowners insurance generally protects against losses or damages to your home and belongings, plus liability coverage for accidents that may occur on your property. What your homeowners insurance covers will differ based on your policy — as well as the cost.
Older homes, those with amenities like pools and those in riskier areas such as on a waterfront cost more to insure. Depending on where you live, you may also be required to purchase an additional policy for flood insurance.
Even if you aren’t required to get flood insurance — or additional coverage like earthquake insurance — you may opt to do so to protect against damage your homeowner’s insurance doesn’t cover.
Like taxes, homeowner’s insurance is often folded in your mortgage and held in an escrow account. If not, you’ll want to divide your annual insurance bill by 12 and put that amount aside monthly.
You’ve probably been used to paying utilities as a renter, but you may find your expenses are greater once you move into your new home — especially if your square footage is significantly larger.
If any utility costs were previously folded into your rent payment, be prepared for separate bills.
Check service providers’ rates to help budget for these expenses. You can ask about average costs from the previous owners, though your usage may differ.
4. Maintenance and Repair Fund
Though you may not have to save as aggressively as when you were trying to come up with a down payment, personal finance experts suggest homeowners save 1 to 2% of their home value each year for maintenance and repairs.
A good place to keep these funds is in a high-yield savings account or money market account. You may not dip into these savings every year, but you’ll want to easily access this money when something needs fixing.
Alternatively, you could purchase a home warranty, which covers repairs to certain systems and appliances, like your HVAC system or your fridge. Weigh the costs of the warranty (plus any related service fees) against how much you would save on your own for future repairs.
5. Homeowners Association (HOA) or Condo Fees
If you live in a condo or neighborhood with a homeowners association, you get a bonus homeowner expense: HOA or condo fees. These fees are collected to cover expenses related to shared amenities, common space, neighborhood aesthetics or security.
These fees vary, but they can tack on a couple hundred dollars to your monthly housing expenses.
If you pay your fees once a year, set up a sinking fund and save up each month.
6. Pest Control
Gone are the days when you’d just call your rental office if you found ants invading your kitchen. Now that lovely task is on your plate.
You could go the do-it-yourself route and purchase pesticides, barrier treatments or traps from a home improvement store. But if there’s a family of rodents in your attic, you may want to call in the professionals. Pest control companies have the expertise and more effective extermination solutions than what you can buy at the store.
Shop around for quotes from different companies to get the best deal. Many offer contracts for preventative maintenance if you want your home treated regularly.
7. Lawn Care
Lawn care is another task you’ll want to decide whether to do yourself or outsource. If you’re hiring a lawn care company, be sure to shop around for the best prices.
Get recommendations on lawn care, pest control, and home repair services from websites like Angie’s List, HomeAdvisor or Nextdoor.
If you go the DIY route, factor the cost of equipment and supplies in your budget. Some equipment may also include ongoing costs, like buying gas for your mower.
Time and energy are other expenses you’ll face, though it’s harder to determine a clear dollar amount.
While lawn care may seem like an aesthetic thing, your city— or HOA — likely has rules and regulations regarding maintenance. You could get fined for letting your grass grow too high.
8. Security System
A security system is optional, but it’s an expense you may give a second look once you move into your own home. Your house is a major asset and you’ll want to protect it — along with your family and belongings.
When considering security systems, budget for the initial cost of buying and installing the system, plus the monthly cost for monitoring.
At the bare minimum, when you move into a new house, you’ll want to pay to get all the locks changed.
Facing Homeowner Expenses Responsibly
Before buying a house, gather cost estimates and quotes and create a mock budget to make sure you’re comfortable with all your new homeowner expenses.
Taking a HUD-certified homeowner course prior to buying a home can help you prepare for the financial responsibilities of homeownership.
Don’t neglect the costs involved with moving either. A truck rental, cans of paint and purchasing furniture adds up.
This laundry list of expenses isn’t meant to rain on your parade. Buying a home is a joyous occasion, but you ought to be prepared to handle any storms that come your way. When the housewarming party is over, you’ve still got saving to do.
Life is Strange. Live it Well.