Homeownership is a lot more expensive than simply the purchase price. While a lot of buyers forget to budget for closing costs, just as many are guilty about not budgeting for the ongoing expenses of homeownership.
If you’re a first-time homebuyer who has rented all your life, you could end up “house poor” if you purchase a home at the top of your housing budget and forget to leave some money aside for monthly expenses. Let’s take a look at some of the expenses that come along with being a homeowner.
Home Insurance
Whether you purchase a new condo or home, you’ll want to ensure you have adequate home insurance. A home will most likely be your most valuable asset, so you’ll want to do everything you can to protect it. If you have a mortgage, most lenders will require that you have home insurance in place day one when you move into your new home. Home insurance can be paid annually as a lump sum or monthly, although some insurers give you a discount if you paid once a year.
Utilities
With homeownership comes great responsibility. When you’re a renter, you don’t have to worry about utility bills – it’s covered in your rent. When you’re a homeowner, it’s important to budget for your utility bills, such as your heat, electricity and water. If you’ve never owned a home before it’s a good idea to create a budget in advance and plan for these monthly expenses, as they can be quite costly. Utility bills vary depending on the size on your home and usage, so it doesn’t hurt to ask to the current owner how much they spend on utilities so you can get a ballpark figure.
Repair and Maintenance / Condo Fees
One of the most expensive parts of owning a home is upkeep. Repair and maintenance costs cover everything from a new roof to landscaping. A good rule of thumb is to budget three per cent to five per cent of your property’s value each year. For example, if you own a $600,000 home, you should budget up to $30,000 a year towards upkeep.
Although condo owners don’t have to worry about expenses like a new roof, they still need to pay their condo fees. Condo fees cover everything from repairs to amenities. Before you purchase a new condo, it’s important to find out about the condo fees to see if they fit in your budget.
Property Taxes
There are only two things certain in life: death and taxes. It’s important not to forget about property taxes, as they represent one of the most costly monthly expenses for homeowners. Whether you’re purchasing a house or condo, you’ll need to pay property taxes. Property taxes are paid to your city or municipality and cover expenses such as infrastructure and transit. Similar to all your other utility bills, property taxes can go up annually; your city council typically votes on the increase when they are finalizing their budget for the next fiscal year. Property taxes are paid monthly and can be paid directly to your city or by your lender with your regular mortgage payments.
