The True Cost of Owning a Home: A Comprehensive BreakdownDecember 12th, 2022 by Administrator
It can be hard to understand the true cost of home ownership until you’re in it. As a homeowner, you’ll be responsible for paying various expenses throughout the year that can surprise you if you don’t know about them in advance and are budgeting accordingly.
These costs include property taxes, insurance premiums, maintenance and repairs, home improvement projects, furnishing, real estate agent fees and so on. True cost of buying a house basically divides into two categories: upfront cost and ongoing cost.
Upfront costs include the down payment, closing costs, real estate agent cost and any renovation or repairs you may need to make.
A downpayment is the percentage of the total price that a buyer pays upfront to buy a home. This can be in the form of cash or via financing. The down payment amount is typically financed with a mortgage, which means that it’s paid back over time with monthly payments.
2) Closing cost
There are a few different types of closing costs that you will need to be aware of before purchasing a home. The first is an origination fee, which can range from 0.5% to 5% and covers the lender’s cost for processing the loan, as well as providing an escrow account for taxes and insurance. The second type is closing fees, which will vary depending on where you live and what kind of loan you take out.
Ongoing costs depend on where you live and your lifestyle. It may include the following cost:
1) Mortgage payment
A mortgage is a loan that helps you purchase a home. Most people take out a mortgage to buy their first home and then use the equity in their homes to help them when they want to buy another property.
Mortgage payments are typically divided into two parts – principal, which is the amount borrowed or lent, and interest, which is what you have to pay in order to borrow or lend money. You can calculate your monthly payment by multiplying your interest rate by the number of years you have left on your mortgage.
2) Homeowner and mortgage insurance
Homeowner insurance protects your home from external events that can lead to costly repairs or renovations. Mortgage insurance protects the lender in case you are unable to make monthly payments. The cost of homeowner and mortgage insurance varies by location, but is generally a few hundred dollars per year.
3) Maintenance and repairs
Home maintenance and repairs are a huge expense that many people neglect to account for when they calculate the true cost of owning a home. The average homeowner spends $2,000 per year on upkeep and another $1,000 on unexpected repair costs. That means you’ll need to set aside an additional $3,000 each year just to keep your house in running order.
4) HOA fees
Homeowners’ association fees (HOA) are one area where home buyers should be aware that they will have a monthly expense. HOA fees are typically paid to the local homeowners’ association, which manages and maintains common areas such as parks and roads. The annual dues can range from $100 per year to more than $1,000 per year, depending on the size and location of the home.
There are many costs associated with owning your own home that you might not consider when applying for a mortgage. While interest rates, down payments, and mortgage terms are something that anyone should be aware of before taking on a mortgage, there are other fees to consider.