The Costs of Home Ownership Page

One of the keys to evaluating whether you should rent or buy a home is knowing the costs of home ownership. Although it is impossible to narrow a figure down, below we list the major general expenses that you’ll need to know about as you weigh homeownership with renting.

With knowing what general expenses to look for you can then apply them to specific homes you are interested in purchasing to determine if buying is right for you. Also, use your real estate agent to help you evaluate your options.

• The first big expense you need to think about is the mortgage. To figure your mortgage expenses, it actually helps to work with a loan officer, or at the very least a real estate agent to get a very close approximation of what your payments will likely be. Mortgage calculators only go so far as they are set to give real general payment information and are typically not set up to be location specific.

• Speaking of location specific - taxes - real estate taxes vary tremendously across the country. They vary significantly within your state too depending on where you live. For example, Harrisburg PA has much lower property taxes than say a city like West Chester PA. Typically the closer you live to a larger metropolitan area the more you will pay in real estate taxes.

• Homeowners Insurance - if you get a mortgage you will have to have homeowners insurance (hazard insurance). This insurance protects your lender’s investment in your home. Just like auto insurance, no two insurance companies are created equal so you’ll need to shop around to at least 2-3 insurance companies to get the best rate and coverage for your needs.

• Unlike renting, as a homeowner you are the landlord so you are the person you will need to call if there are maintenance issues around your home that need attending to. Maintenance and repair issues include: landscaping, plumbing, and even patching a leaky roof. Hint: set aside about 1% of your home’s purchase price annually for general maintenance needs.

• Speaking of being the landlord - as the homeowner you will be responsible for paying all of your utilities like electric - gas - water - trash - recycling. As a renter you may or may not have to pay for these so don’t forget about them as you analyze your homeownership budget.

• Along with maintenance and home repair expenses you will need to keep your eye on money for home improvement or upgrades within your home as well as decorating. When you move in, you will want to purchase drapes, linens, new carpet or other items for the home which can add up pretty quickly if you are not prepared. In addition to home decorating, maybe you envision expanding a room or redoing the kitchen. These can be pricey so make sure you buy a home that you can live with if you don’t have the cash immediately to make the upgrades that envision.

• Last but not least - homeowners’ association fees. Depending on where you live you may or may not have to worry about these fees. Make sure you check with your real estate agent about if you have these fees and what they are if you have them. Typically you are required to pay them annually or semi annually separate from your mortgage so make sure you budget accordingly.

With these fees in mind, you should be able to better determine whether you should rent or purchase a home.