Have you ever owned a property before? If so, you’re already aware of the costs you run into. For those of you who haven’t, keep reading. There are a few hidden costs that you may not know about when buying a home. If you take out a mortgage on a property, you will have your monthly mortgage payment plus a few additional costs and fees depending on where you live. Here are a few that we’ve run into:
If you a renting a property, you are not responsible to pay the property taxes. When you are a homeowner, you have to pay yearly property taxes which, depending on the area you live, will go to public works, schools, wages for government workers, levy protection, or drainage districts to name a few. Property taxes are assessed every year and may change based on the current value of your home. Your taxes will also go up if any improvements are made, like adding a shop or implement shed. You can pay your property taxes two different ways; monthly or yearly. So when you are shopping for a home don’t forget about the cost of property taxes. We include the property taxes for the previous year on all of our properties for your reference so you can make a well-informed decision before buying a home.
If you live in a rental property you know that most maintenance is done by the landlord or property manager. If you buy a home, those costs are now your responsibility. Any time the appliances stop working, you need new windows or roof, or your home needs any other upgrades, those costs come out of your pocket. It is suggested that you allocate 1% of your home’s value into maintenance costs every year, but you should plan on more that that. 1% is the minimum you will have to spend. If you plan on having a large renovation you should plan on the costs being higher. One suggestion we make is look up the cost of some of the items you would be using to renovate or get a quote from a licensed party and see how much it would cost to complete your desired renovations.
When you take out a mortgage loan, if you put less than 20% down on the property, you are required to have Private Mortgage Insurance (also referred to as PMI). What PMI does is protect the lender if you default on your loan. It is normally costs 0.5% to 1% of the loan amount and is charged yearly. Normally, you pay for it monthly rather than a large one-time payment. We try to remind home buyers of this to ensure that they’ll be able to stay in their dream home.
Tornadoes and floods are something our area is very susceptible to. When you own a home, you will need to have homeowners insurance on your home to protect it from things like plumbing issues or leaky roofs. In the Midwest, it’s also good to have supplemental insurance that covers problems weather-related problems, such as hail damage, flooding, etc.
Landscaping and Lawn Care
When you rent a condo or an apartment, it’s highly likely you are not spending a lot of time outside in a yard. When you buy your own property (should it have a yard or some kind of outdoor area), expect some hidden costs to come in the form of lawn care. Does the yard need some major landscaping? Are you going to mow it yourself, or will you hire a company to do it? Do you have a lawn mower, rakes, snow or leaf blower, yard tools, shed, and any other items needed to keep your yard looking great year-round? A yard comes with extra costs, so be sure to know how much you want to spend on upkeep per year.
If you rent, you probably don’t even think about mowing the lawn or landscaping. When you own a home, that is something you will need to take care of. When thinking about buying a home, take the following questions into consideration. Are you going to be able to mow the yard yourself or can you afford to have a company do it for you? If you own a home with a larger yard, can you afford the lawn mower to make mowing your lawn easier? What happens when it snows? Can you get the drive plowed so you can get to work in the morning? Having a yard means you need to take care of it. How much care can you afford?
In the rural areas of the Midwest, HOA fees are extremely rare. However, many homeowners in the city have to pay Homeowners Association (HOA) Fees. If the community you live in has common areas like a pool, clubhouse, or community meeting place it is likely that your home is going to have an HOA. These fees will vary based on what the HOA covers in the community. There are also some HOAs that have special rules such as your grass can only be one inch tall or you can’t build anything that will show above your fence without written approval from the HOA. When looking for a home, inquire about potential HOAs and their monthly fees.
Buying a property is a huge step in anyone’s life, and a step most people are looking forward to taking. We want to make sure anyone who is considering buying a property is making an informed decision and can afford the home they want to live in. If you can afford it, owning a home is a good investment and a rewarding experience. It is very important to think about all aspects of the property when you are thinking about buying. Here is a link to a calculator that we think you may find helpful in your search for a home. http://www.free-online-calculator-use.com/house-affordability-calculator.html#calculator