How To Be Fully Prepared For The Biggest Purchase Of Your Life
With interest rates rising and the hot sellers’ market, buying a house is more challenging than ever. Of course, you’d like to have your own place and equity – especially because the rent prices are going up as well. So, even though it’s 100 % worth it, buying a home sure does cost a lot. And that’s why you should be informed as much as you can and know about other hidden expenses you might have during the biggest purchase of your life.
Many future homeowners are not even aware that the monthly mortgage payments are not the only thing they should keep in mind. Keep reading this article and be ahead of the game. Knowing all about the hidden costs you might face when buying a house will help you set a proper, more realistic budget and avoid uncomfortable surprises.
Closing Costs
You have your down payment, got pre-approved for a loan, found a place and got a loan. Great! Now you have to pay for all of the paperwork, broker fees, insurance, etc. Closing costs vary, so be prepared to have 1.5% – 4% of the home’s purchase price.
Home Inspection Fee
A home inspection is one of the most important things you should do when buying a house. Skipping on this can result in additional spending! Why? Because you missed out and didn’t see all the wrong things with the house before you bought it so now you have to pay for all the fixing! However, even though it’s serious, a lot of people skip this. Don’t do the same!
Sellers might have a pre-sale home inspection, but it won’t hurt if you got your own. The general home inspection cost is around $500, more or less, so make sure you put this account into calculations as well!
Moving Costs
This one is often very overlooked. It’s not surprising though, since most people get caught up in paperwork, money, layouts, etc. You forget you have to move out of your current place! You have to move all of your stuff from one place to another, and make sure that the place you’re leaving behind looks exactly how you found it – get that deposit back! All of that costs money. The cost of moving depends a lot on the distance, the size of your old home, and the hours needed to move – so it’s hard to come up with an average. The price can be anywhere from $800 to $2000 or more. To get an estimate (or hopefully, the exact amount of money needed!), do some research and contact multiple moving companies. Provide as many details as you can!
Read More: Most Common Mistakes When Buying A House
Insurance
Apart from regular home insurance, which is around $900 per annum, there are multiple types of insurance you might stumble upon when buying a house. It might include mortgage insurance, life insurance, and title insurance. When coming up with a budget for the purchase, make sure you take all types of insurance into account.
Property Tax
Yup, you’ll need to pay property tax. The amount will be calculated based on your house’s worth and the municipal property tax rate. It’s usually between 0.5% and 2.5%. The size of your property and your income don’t matter at all when it comes to deciding how much you have to pay for property taxes.
Legal Fees
When purchasing a home, it is easy to forget that lawyer fees will be an expense. The exact amount varies, based on the purchase price and the lawyer/notary.
What are you paying for exactly here? The work a lawyer does, like conducting a title search, drafting it, preparing the mortgage, etc.
Higher Utility Costs
People often forget to add in the increase in utility bills and are surprised when they realize they are spending more money on electricity, for example. Often, you move from a smaller place to a bigger one – so it’s only natural that the utility expenses will be higher. Put that into account as well!
Renovation & Decoration
Even though it’s fun and amazing to make your new home truly yours, it does cost money, especially if you’re thinking of doing some serious renovation work. Before you even purchase the place, do some research on how much the renovation is going to cost you, and see if you can afford it – or at least come up with a plan on how to afford it. Furniture is expensive, contractors need to be paid. Our advice is – baby steps! You don’t have to go through the whole reno-furnishing at once. Patience is a huge virtue!
Read More: Things You Need To Know Before Buying Your First House
Condo Fees
If you’re buying a condo instead of a house, get ready for some condo fees. People often forget that since they didn’t have to pay them before, so many of them are not even aware of the cost.
A condo fee is different from property tax (you still have to pay for that) – it’s a non-negotiable monthly fee that covers a bunch of expenses, such as some of the utilities, contributes to the reserve fund, and pays for the maintenance of common areas in the building. The fee is calculated based on your share of the condo building – the larger your unit, the bigger your fee.
Maintenance fees
This one is for house buyers. You probably want to buy a house mostly because of the backyard, the space where you can barbecue and hang out with friends and family. You’re maybe even thinking of the perfect lawn you’re going to have, maybe even a pool!
All of that costs money. Maintenance is a must, whether it’s for things like lawn or more serious fixes like a leaky roof.
It’s common to forget about maintenance costs, especially if you’ve been renting this whole time and the repair costs were covered by your landlord. Now, you’re the landlord and all the responsibilities fall on you. To help get all of that covered, try having a budget for emergencies. That way, you will be able to afford to fix the AC if you have to, without adding any extra weight to your monthly expenses.
The Takeaway
The more you know, the better! As always, research and patience are key – so make sure you get familiar with all the extra costs you might have when buying your first home. Set up a realistic budget and be prepared! You can also reach out and let us help you find a place you won’t mind spending on!
