Buying a home you can barely afford can be a big mistake: nearly 1.3 million Americans had their homes foreclosed in 2006, at an average loss of $75,000. On the other hand, if you rent long-term you’re missing the opportunity to build a nest egg out of “home equity” — which is defined as the worth of your home minus what you still owe on your home loan.
Because the additional costs of owning a home are not as clear as you would expect, prospective buyers should be diligent when calculating the cost of home ownership.
What are the additional costs of owning a home?
Any veteran homeowner can tell you that mortgage payments are only a portion of what it costs to own a home. First-time buyers may be familiar with additional costs such as property taxes, but there’s a whole range of other unexpected expenses that are hard to quantify. Throw in maintenance and upgrades and affording these expenses can become a real financial juggle.
According to a recent study within the first year of home ownership, 75% of homeowners face a costly unexpected emergency while 57% tackle more projects than they initially planned for. Even if you buy a high end home in Los Feliz California you may still end up spending more time and money than you initially expected to increase curb appeal or attend to emergency repairs.
In addition to emergency repairs and maintenance you should also consider the cost of remodeling and upgrades. What about that nice kitchen you’ve always wanted? On average, 46% of homeowners underestimate the true cost of a project they take on while 51% end up spending more time on the project than they had initially planned.
Some average costs for common maintenance and upgrades include:
– $3,279 for landscaping
– $2,485 for a new fence
– $3,279 to build a deck
– $168 for lawn services
Some average costs for common emergency repairs include:
– $275 for blocked pipes
– $2,068 for water leaks
– $199 for a clogged drain
– $320 broken A/C Unit
The problem lies in determining the cost of home ownership. With that, there are many variables, all working over different time frames. There is no simple monthly cost for owning a property, though there might be homeowner’s association dues on top of many other expenses. There is a “sticker price” for a home. But that number bears very little relation to the actual cost we’ll experience living in a purchased home. However, a good rule of thumb is that home buyers should plan to spend at least 1% of the their home purchase price on repairs and emergencies each year!
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