Hidden House Costs for First Time Homeowners

06 Dec

While purchasing a home is certainly a wonderful investment and usually a much better long-term financial decision than renting, as a first-time home buyer, there may be some unanticipated, hidden costs beyond just the cash due at closing. Many individuals and couples new to the home ownership game may not anticipate those hidden line items beyond the lender’s settlement sheet. Thus, a little reading and research will leave you more than prepared for everything, including the excitement of your purchase.

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  1. Property Taxes: Now that you own your home, you’re responsible for paying the local taxes due on the property. That’s right! Each property obtains an assessed value, based on the area and local governmental factors. Even though we all desire our home value to increase once we’ve sealed the deal to obtain a little more equity each year, a rise in the assessed value also means a rise in property taxes. If you have a loan or mortgage on your house, usually the taxes are factored into your home loan, increasing your monthly payment beyond principal in and interest. But, if you buy your house with cash and do not carry a loan, be prepared to pay your property taxes in arrears (for the previous year) either in one lump sum at the beginning of the year, or in two payments throughout the year.
  2. Insurance: Along with your monthly mortgage payment and taxes (usually set aside each month in an escrow account), you’ll be responsible for holding property and homeowner’s insurance. Again, this is a cost that is typically added in to your monthly loan payment, which increases the bottom line every month. But, if you own your home free and clear (paid cash), you’ll have to pay this to your insurance company every month. Be sure to spend some time conversing with the company you choose to insure your home so that you are able to best the determine the amount of coverage appropriate for you and your belongings.
  3. HOAs: Depending on the property you buy, some areas and homes are part of a home owner’s association. These associations take care of common areas in the neighborhood or complex, such as parks, sidewalks, parking areas, common walls, gardens, etc. In order to pay for the maintenance of these areas, homeowners pay monthly dues. These can range from minimal amounts to extremely high monthly payments (over $1000) for high end and highly maintained properties. Be prepared to set some extra cash aside for your HOA, if your neighborhood requires it. On the plus side, often condo and townhome HOA fees include everything…such as utilities (gas and electric), trash, etc. That means you’ll be saving in other areas where you may have been paying before you owned.
  4. General Maintenance: Before you owned your home, your landlord most likely took care of all the home maintenance and repair costs. You probably never really thought about those things, and how they can add up over the years. As the newness wears off,” things” just “happen” to homes. And, if you’ve purchased an older home, those “things” tend to happen more often. One month the refrigerator goes out, the next month the furnace dies, and then two months later the hot water heater decides to act up. These are things that cannot necessarily be anticipated and are not covered by homeowner’s insurance policies. They are simply costs associated with owning your home. Be prepared to set aside some emergency money in a special home maintenance fund so that you’ll be ready, just in case something goes awry – and it will, eventually.

Owning your first home is so exciting! However, there may be some unexpected and unanticipated costs associated with your purchase each month. Be prepared with the extra funds to cover the monthly costs and be a happy homeowner.




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