The Hidden Costs of Owning a Home
Your bank’s mortgage calculator doesn’t know that you’re prepared to shop at thrift stores or drive a Cressida to make payments. What it does know is that your home costs more than the home loan repayments and interest. The true cost of owning a property includes many hidden fees and payments that new home buyers fail to factor into their budget. Here’s a list of the most expensive additional costs and the hidden costs of owning a home.
1. Inspection and Appraisal
If you’re getting a home loan to purchase your property, then the bank will want to make sure you’re not paying more than it’s worth. In fact, even if you’re not going through a bank, you’ll want to make sure you’re not paying more for it than it’s worth. You will need to get the home appraised (for its true value) and inspected for pests or other deterioration.
2. Tax
Whenever money changes hands, the tax man’s hand is out and open. Property tax must be factored into the purchase of your home, even if you have a fixed-rate home loan. This tax is added onto your repayments.
3. Home and Life Insurance
Whether you want to buy insurance or not, your bank (or other lender) will probably require that you get ir. A life insurance policy will protect their vested interest in the asset (the home) in the event that you die, and a home insurance policy will protect their vested interest in the event that the home is destroyed. Home and life insurance costs can be expensive monthly payments (depending on the cost of the home and the amount insured). Luckily you are allowed to choose your insurance provider and possibly save some money on premiums.
4. Utility Bills
Utilities are those essentials provided to you by the municipality such as water and electricity. These costs are often highest when you first purchase a home. Once you’ve moved in and established a routine, you can begin to monitor and control how much you spend on these. Many homeowners install geyser timers and other switches to reduce how much electricity and water their family consumes.
5. Home Repairs
Homes, whether newly built or 20 years old, will require repairs. Previous owners may not have been as dedicated about maintaining the home as they should have been. Houses also settle, causing cracks and other damage to the structure. These can cost up to two percent of the overall purchase price of the home. Factor this into your budget when getting a home loan.
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