The feeling of success when you can finally afford to buy a home after all the sacrifices and hard work is indescribable. All your hard work has finally paid off, and you can finally relax and enjoy life. You know that you’ve worked hard and persevered through everything, and it feels great to reward yourself with such a significant accomplishment.
And while buying a house can get you incredibly excited, make sure you don’t get lost in the excitement. It’s important to stay realistic and understand that a home is a huge financial responsibility. You have to worry about the mortgage payment, and you also have to think about things like property taxes, repairs and maintenance, and homeowners insurance. And if you don’t prepare for these costs, you could find yourself in severe financial trouble.
When you’re thinking about how much of a house you can afford, you need to consider more than just the home’s purchase price. Here are some of the other expenses you’ll have to pay when purchasing a home:
Mortgage Payments
Mortgage payments are the most significant part of your monthly expenses when you own a home. The mortgage payment is usually the most considerable debt you have. When you get a mortgage, you agree to pay back a certain amount of money in an agreed term of monthly payments. This amount usually includes both the principal and the interest on the loan.
The interest is the fee that the lender charges for borrowing money. The principal is the amount of money that you’re borrowing. Your mortgage payment will be higher if your interest rate is higher, and it will be lower if your principal is lower.
Make sure you understand all of the details of your mortgage before you sign anything. You don’t want to get in over your head and find yourself unable to make your mortgage payments.
Choosing a mortgage that best fits your lifestyle and income is essential when looking for a mortgage or moneylender. If you select a mortgage that’s too high or doesn’t fit your needs, you could run into financial trouble down the road. So do your research and find a mortgage that’s right for you.
Property Taxes
Property taxes are the second-largest expense you’ll have to pay as a homeowner. It’s an expense based on the value of your home, and they usually go up every year. According to the National Association of Realtors, the average American household paid $2,197 in property taxes in 2017.
You can deduct your property taxes on your federal income tax return if you itemize your deductions correctly. However, you can only deduct the amount you paid during the tax year. So if your property tax bill is due in January, but you don’t pay it until February, you can only deduct the amount you paid in February.
Some states and localities offer programs that allow you to defer or even avoid paying your property taxes if you meet specific requirements. For example, senior citizens and disabled homeowners may be eligible for a property tax deferral program.
Repairs and Maintenance
As a homeowner, it’s your responsibility to keep your home in good repair. That means fixing any broken appliances or making any necessary repairs. And while some repairs are minor and won’t cost much money, others can be pretty expensive.
For example, replacing your roof can cost anywhere from $5,000 to $10,000. And if your furnace breaks down, you could be looking at a repair bill of $1,500 or more. So it’s essential to have some money saved up for unexpected repairs.
You can also expect to spend money on routine maintenance, such as painting your home every few years or cleaning your carpets. These costs can add up, so it’s important to factor them into your budget.
Homeowners Insurance
Homeowners insurance is a must if you own a home. It protects you from financial loss if your home is damaged or destroyed by fire, wind, hail, lightning, or another covered event. Homeowners insurance also covers liability if someone gets injured on your property.
According to the Insurance Information Institute, the average cost of homeowners insurance is $1,288 per year. But this amount can vary depending on the value of your home and the amount of coverage you need.
Lenders will require you to have your home insured. Whether you have a mortgage or you don’t, it’s still a good idea to have home insurance. If your home is damaged or destroyed, it could take years to save enough money to rebuild it.
Homeowners insurance is an annual expense, so you’ll need to factor it into your budget. And if you ever make any changes to your policy, such as increasing your coverage limits, you can expect your premiums to go up.
As a homeowner, you’ll need to budget for more than just the purchase price of your new home and your mortgage payment. You’ll also need to factor in the cost of repairs and maintenance, utilities, and homeowners insurance. By taking all of these costs into account, you can make sure you have enough money to keep your home running smoothly.
