4 Commonly Overlooked Costs of Buying a House
Buying a house has historically been seen as part of the “American Dream” and part of the process of growing up to be a financially independent, from your parents at least, adult.
Like so many others, my wife and I bought our first house with our eyes wide shut. We had no idea what we were really getting ourselves into and we did not really have a budget in mind for our first home.
Eight years later, we have learned a lot about finances and about homeownership. So today I wanted to share with you four of the most commonly overlooked costs of buying a house. If you’ve already bought a house and you missed these costs too, don’t worry about it too much, Mrs. Frugal Rules and I did too!
Private Mortgage Insurance
One of the most commonly overlooked costs of buying a house, at least for first-time buyers, is private mortgage insurance (PMI). PMI is most likely part of the monthly mortgage payment you make every month if you did not put down at least a 20 percent down payment when you bought your house.
PMI is a fee that is charged in your monthly payment until you hit 20 percent equity in your home. But you might be able to find mortgages and savings from Newcastle Permanent to help you avoid some mortgage costs and fees, like PMI. If I could go back and do things over again, I never would’ve bought a house with no down payment saved up. That PMI can really hurt when you add up how much is cost you over the years.
If you go from living in a tiny basement apartment to a 1,100 square foot home like a friend of mine did when she bought her first house, the huge difference in utility costs needs to be considered. Her costs skyrocketed from about $30/month to $120-150/month for utilities alone.
There are times when utilities can work in your favor too though. If you go from living in a rental house with crappy insulation and leaky windows to a newer, better insulated home of about the same size, you might end up spending less on utilities.
Most articles about the costs of homeownership mention the continual amount you need to put aside for continued maintenance and repairs of the home you own, but most do not mention the time costs of homeownership. Until I owned a home, I never thought about how much time it would take to do even simple tasks like mowing the lawn, and winterizing your home every year. With all of the routine tasks associated with homeownership, it’s easy to spend your whole weekend working on only the upkeep of your home.
Finally, most new homeowners don’t consider the fact that they might need a larger emergency fund just because they now own their own home instead of renting. The fact is that when you are renting it’s up to the landlord to replace and maintain things, but when you own your home it’s your responsibility if the water heater breaks, the roof leaks, or you need to replace the siding. Some of these things you can plan for, but others you cannot. Having a large emergency fund in place is extremely important if you are a homeowner.
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