Are you tired of paying rent to The Man and have decided you need to be in charge of your own destiny? Do you wish you could have a nice home where you can do whatever you want? Do you need a bigger back yard for your dog or a bigger room to keep your collection cat trees?
If you’re ready to make the big step and commit to owning a home then there are some costs beyond the price of the home that you are going to have to take into account.
Insurance: Your mortgage company requires that you have a basic homeowners insurance policy that covers mostly just fire and falling trees (but not when caused by acts of war or insurrection). You may also be required to purchase flood insurance depending on your location on a flood map. Add to this earthquake insurance if you live in an unstable area (including Missouri). Taken together this could be anywhere from $500 per year to $2000 and up per year depending on the replacement value of your home and your risk level based on the location of your home.
Association Fees: If you live within the nosy and restrictive confines of a homeowners association then you’re going to pay the organization fees. The services you get for these fees could be as little as the ability to complain or as much as yard maintenance and exterior painting. The association will generally rely on lawsuits if you fail to comply with their rules. Fees can be as low as $25 per month and go up sharply from there. Condo fees of $500 per month are not uncommon.
Taxes: The property tax rates are largely determined based on the assessed value of the property and structure. On the low end are several parishes in Louisiana starting at 0.13% of the assessed value annually and as high being several counties in New York State (Monroe, Niagara, and Wayne Counties are the highest) topping out at 2.89% of the assessed value annually. The full list of property tax rates by municipality for 2009 can be found here. For a $150,000 home in Monroe County New York you will be paying $4,335 per year.
When you buy a home some municipalities also have a transfer fee. If it exists it is usually around 1% of the sale price and is split between the buyer and seller.
Upkeep: Your shiny new home won’t stay shiny very long if you don’t keep dumping time and money into it. The first thing you’re going to need is tools. If you’re like me then you don’t see buying tools as a bad thing, but rather a fun thing. Your water sucking lawn and exquisitely manicured plants will require that you own a lawnmower, leaf-blower, hedge-trimmer and a wide assortment of hand tools. If you’re a real man then you’ll also need an air compressor, but for no reason other than you should own one.
You’re going to need to start saving right away to replace the roof. Sure, it’s fine now, but when the time comes to spend $2,000 to $10,000 depending on the size and how much needs to be replaced, you’re going to wish you had been saving all this time.
You should also know that a new furnace or air conditioner can be around $2000 each to replace. If you want to add air conditioning to a home that does not already have it then you can double that cost. The good news about replacing old units is the new ones are considerably more efficient. The same goes with the hot water heater, a new one can often pay for itself, but you still have to front the several hundred dollars for it.
When you add it all up you can easily spend an additional $10,000 per year in on top of your already big mortgage payment and your regular bills.
Now, doesn’t renting sound nice?
