As a new homeowner, you should be aware of the different types of expenses you may encounter. From property taxes to repairs and maintenance, there are many costs to consider. These expenses may or may not be tax deductible, so it’s important to consult with a tax advisor to see if they apply to your situation. So, here are six expenses of home ownership you might have missed when buying a new home.
1. A Warranty
One of the most common expenses of home ownership is a warranty. When you buy a new home, it’s important to remember that your home is a big investment. To protect your investment, you may want to purchase a warranty.
A warranty is a service contract that covers repairs or replacement of certain items in your home. When searching for a home warranty provider in Florida, make sure to read the fine print and understand what is and isn’t covered. Additionally, compare different providers to get the best coverage for your needs. A warranty can cover items such as your air conditioner, refrigerator, oven, and more.
2. Property Taxes
Property taxes are another of the expenses of home ownership. Your property taxes will be based on the value of your home. The assessment is usually done by the county in which you live. The tax rate is set by the municipality in which your home is located.
In some cases, you may be able to deduct your property taxes on your federal income tax return. Consult with a tax advisor to see if this applies to you.
For example, in 2017, the average effective property tax rate in New Jersey was 2.35%, while the average rate in Illinois was 2.3%.
To calculate your annual property tax bill, multiply your home’s assessment by the tax rate. For example, if your home is worth $250,000 and your tax rate is 2%, your annual property tax bill would be $5,000.
3. Homeowners Insurance
Next on our list of expenses of home ownership is insurance. Homeowners insurance is a type of insurance that covers your home and belongings in case of damage or theft. It also provides liability coverage if someone is injured on your property.
Most lenders require you to have homeowners’ insurance when you purchase a home. The cost of your policy will depend on the value of your home, the amount of coverage you need, and your location.
How To Find the Right Insurance Company
If you’re looking for homeowners’ insurance, there are a few things you should keep in mind. First, make sure you’re getting the coverage you need. Make sure the policy covers the value of your home and belongings, and that it provides enough liability coverage to protect you in case someone is injured on your property.
Shop around and compare rates from different companies. It’s important to get quotes from multiple insurers so you can compare prices and coverage options.
And, read the fine print carefully before signing up for a policy. You want to make sure you understand what is covered and what is not. Homeowners insurance is an important investment, so make sure you’re getting the best policy for your needs.
Mortgage Insurance
If you don’t have a down payment of at least 20%, you’ll likely be required to pay mortgage insurance. This insurance protects the lender in case you default on your loan. The cost of the mortgage insurance will vary depending on the size of your down payment and the type of loan you choose.
4. HOA Fees
HOA fees are another type of expenses of home ownership that you may be required to pay if you live in a planned community or condo. Most people who live in these are required to pay monthly or annual fees to the homeowner’s association (HOA). These fees are used to cover the costs of maintaining common areas, such as pools, playgrounds, and landscaping.
HOA fees can also cover trash removal, security, and other services. The amount you pay will depend on the amenities offered by your community and the size of your home.
5. Repairs and Maintenance
Repairs and maintenance are a big part of the expenses of home ownership. As a homeowner, you’re responsible for maintaining your home in good condition. This includes tasks like painting, repairs, and replacements.
Some of these costs may be covered by your warranty or insurance policy. But, in most cases, you’ll be responsible for paying for these costs yourself. It’s important that you set aside money each month to cover repairs and home maintenance, so you’re not caught off guard by unexpected expenses.
You’ll also be responsible for paying for the utilities in your home, such as electricity, water, trash, and sewage. The cost of utilities will vary depending on the size of your home and the location. In some cases, you may be able to negotiate with your utility company to get a lower rate.
6. Closing Costs
Closing costs are a big part of the expenses of home ownership. When you buy a home, you’ll need to pay closing costs. These are fees charged by the lender, title company, and other parties involved in the transaction. Closing costs can add up to thousands of dollars, so it’s important to factor them into your budget. Closing costs may include the following:
- Loan origination fee: This is a fee charged by the lender for processing your loan
- Appraisal fee: This is a fee charged by the lender to have your home appraised
- Credit report fee: This is a fee charged by the lender to pull your credit report
- Title insurance: This is insurance that protects the lender in case there are any problems with the title to your home
- Title search fee: This is a fee charged by the title company to search for any liens or other problems with the title of your home
- Recording fees: These are fees charged by the county to record the deed and mortgage for your home
- Survey fee: This is a fee charged by the lender to have your property surveyed
- Attorney’s fees: You may choose to hire an attorney to represent you in the home-buying process. If so, you’ll be responsible for paying their fees
When buying a new home, be sure to factor in all of these other expenses of home ownership. These include mortgage payments, insurance, taxes, repairs, and maintenance. By being aware of these costs, you can better prepare for them and avoid any surprises down the road. And, if you’re not sure how to budget for these costs, talk to a financial advisor. They can help you create a budget that works for you.