Cost of Home Ownership - It's Not Just a Mortgage

Written by Posted On Friday, 17 June 2016 16:14

So you've just purchased your dream home. You've gone through the process of securing a loan, searching for the perfect property, closed escrow, and paid taxes but it's not over. Owning a home comes with many additional costs first time buyers need to be aware of. Budgeting accordingly will ensure that you and your home are protected from unforeseen financial hardships.

Buying a home can be so overwhelming that it’s easy for first-time buyers, especially, to give minimal thought to the homeowners insurance process. Yet, if something happens to your home, homeowners insurance can make or break you. Before you just sign on the dotted line, here are some tips to guide you:

Mortgage payments - Consider your price range and calculate the monthly mortgage payments. Your payments will depend on how much you borrow, the interest rate and the amount of time you have to pay off the loan. Keep in mind, the quicker you pay down the principal, the less you pay altogether.

Property taxes - Local governments charge real estate taxes to pay for public expenses, such as schools, parks and sidewalks. Ask the seller or seller's real estate agent to share the current annual tax on a property.

Utility bills - The cost of gas, electric, water, refuse, tv, and internet

Home maintenance - Experienced home owners know that these items should definitely be budgeted in your projected costs of owning a home:

– New roof (most homes need a replacement around the 20-year mark)

– HVAC, plumbing and electrical system upgrades and repairs

– New appliances

– Remodels (for fun or to remove hazards such a mold and asbestos)

– Anything else, from repainting to replacing old windows, that you or your home inspector notices.

Fortunately, doing it yourself can add up to big savings, and most home maintenance adds to the resale value of your home. That doesn’t avoid the fact that you do need to set aside money for eventualities. If you can do a little every month, you’ll be ready for anything.

Homeowners insurance - Home insurance in California is based heavily on the replacement cost of your home. You must insure your home to at least 80% of cost to rebuild your home in the event of a total loss. This amount should include the costs of raw materials, labor, debris removal, ordinance law, and other items. It is NOT the same as “market value”. If this “co-insurance” requirement is not met, there will be penalties, fees, and/or surcharges assessed when the insurance company pays out. It can also vary greatly depending on the area you live. See the chart below. 

It is important to remember that the cost of home ownership is not as straightforward as it seems; however, with the proper understanding and budgeting anything is possible. 

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