True cost of home ownership
It is the American dream of many new families: A spouse, kids, two cars and of course, a new home. While much is written about the ins and outs of buying your first home and managing your mortgage payment, little is ever said about the true costs of owning a home. While you may be able to work your budget around the standard PITI equation, which stands for principal, interest, taxes, and insurance, there are numerous other expenses to take into account before you can determine if a house is really affordable. Many people often wonder: Should I refinance my second mortgage?
The biggest problem that many new homeowners face financially is upkeep of their home, next usually is furnishing the home, and lastly, remodeling the home. While there is no set timetable for these financial outlays, many new homeowners feel it necessary to rush through them at lightening speed. This is certainly fun, but it quickly adds debt and financial burden where there was none planned during the process of buying the home. Take a few minutes to go over the most common areas of expense in a new home to better prepare you financially for homeownership.
Home Repairs Maintenance
While every home will need a bit of repair work, it is the savvy homebuyer that really looks over the house to get a feel for what projects will need to be done in the next year or two. These jobs are typically large in scale or the current homeowner would have done them before they put the house on the market. Things like exterior painting or a new roof top the list and can be very costly for a new homeowner. Many families work maintenance costs into their monthly or even annual budget to help plan for the unexpected. As a rule of thumb plan to save about 1% of the home’s total purchase price annually. When making these decisions, take into account the care that the previous owners gave the house, the climate that you live in, the age of the house, and how much money you hope to get out of the house when you sell it down the road. Using all of these guidelines you can quickly get a feel for your maintenance costs and plan accordingly. If 1% seems steep to you, think of the alternative, which is having to take out a loan to pay for a new roof, or worse yet, letting a problem go because you cannot afford to fix it, and then running into more repair costs as a result of the original problem.
Home Painting Redecorating Improvements
Usually the most fun you will have as a homeowner is with improvements or remodeling projects that transform the house into the dream house you have always pictured in your mind. Of course, it is important to look at the return on investment and going a little overboard on these projects is easy enough to do. Keep in mind that the most commonly remodeled areas of the home are the kitchen and the bathroom. As a rule, they are also the most expensive to remodel costing homeowners several thousand dollars for just the basics. Even painting the rooms in your home to change their appearance can be several hundred dollars when you take into account the paint, brushes, drop cloths, etc. Of course, the more work you can do yourself the better off you are, but not many of us have the ability to do a full remodel. Loans are certainly an option, but most financial planners will tell you that the only time you should borrow money is when buying something that is going to appreciate in value. In general, home remodels depreciate over time.
Often overlooked by new homeowners, that recliner and wooden crate you have always set your television on will not go very far in a new home. Families that move from an apartment or smaller home will often find that their new homes are so empty they echo. Everything from window coverings to lamps, rugs, end tables, kitchen tables, dressers, and more will be needed. While it may seem like these items are of the utmost importance, our advice is to wait or at the very least move very slowly in this regard. Not only will you save a bit of money if you can watch television on the floor for a few weeks, you will have time to think through a decorating idea and plan accordingly. There is nothing like buying a lamp or two and then finding out that they just don’t match your new couch or Oriental rug. Take things slowly and save up for those larger purchases first. You can then quickly build around them with other less expensive furnishings.
Owning a home is one of the most enjoyable accomplishments in the lives of many families, and the ability to repair, maintain and change the home over the years will bring you great satisfaction as long as you plan accordingly to avoid financial burdens.
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