Budgeting For Your New Home- By: M Shane
When you look at buying a new home, you need to factor in the cost of things that as a renter you didn’t have to worry about. Stove die? The landlord will fix it. Roof leaking? The landlord will get someone to look at it. Property taxes? What are those? Now all of these expenses – and more – are going to be your responsibility.
The mortgage is the main payment associated with owning a home. This is the sum that will pay, over the months and years, the principal and the interest of owning your house. The mortgage is not like a rental payment; pay the rent late and chances are that your landlord will grumble, but if it doesn’t happen again, won’t give you much trouble. Be late with a mortgage payment and your credit is suddenly in jeopardy.
If you cannot afford to put 20% down on the purchase price of a home, you are probably going to have to get mortgage insurance. This can put quite a dent in your spending money, as it is a percentage of your overall loan, which can add up to hundreds of dollars a month in some cases. Make sure that you get a quote from a reliable insurer.
The annual taxes add another burden to your new expenses. Depending on how your home is evaluated, your taxes can be several thousand dollars a year. If you have this attached to your mortgage, it could be several hundred dollars extra; if you don’t, you had better have the lump sum at the end of the year. Delinquent property taxes can mean tax liens that end in the foreclosure of your home.
Your own home requires regular maintenance, something you’ve never had to think about before. Major work like a roof replacement will run into the thousands. It’s best to save for major repairs before they happen - a home emergency fund is invaluable for this purpose. Aim for several times your expenses – 6 months to a year is ideal. This way, you won’t be overly stressed when the furnace tanks or the roof decides to slide into the neighbor’s yard.
The utilities for your home may be more than the utilities for your previous residences, especially when you move from a condo apartment situation to a house. Houses cost more to warm than apartments and you may be dismayed by the jump in utility bills. You can counteract this by doing more to insulate your home against cold and hot weather, but then you’re looking into your maintenance fund… There are also the fees for garbage pickup, water, etc. that you should inquire into.
Your expenses for your new home can make a significant jump compared to your previous residence. It can be advantageous for you to figure these out ahead of time. Wise budgeting and saving makes home ownership financially advantageous, but ensure that you are prepared for the initial added expense.
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