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When you purchase a home, you payfor it each month. However, it's not just your mortgage payment that you pay.You also pay for insurance, property taxes, utilities and maintenance costs.When you're trying to budget for your future home, it can be hard to determinehow much each one of those will cost a month. Here's an in-depth look on eachof the parts that make up your housing costs.
Mortgage Payment
Most people aren't able to putdown 100% of the cost for a home in cash. They have to borrow money from thebank to purchase a home, and then pay off that loan in monthly payments.Mortgage payments depend on how long your loan lasts and at what interest rateyou borrow the money. You can calculate a mortgage payment estimate by lookingat the average selling cost for homes for in the area you're looking to move.Use this Bankrate calculator and input how long you want to have a loan, and yourcredit score to find what loans for which you'll likely qualify. That will helpyou determine what your monthly mortgage payments will look like.
Property Taxes
Location is important when itcomes to buying a home. As we've explained in our Rent or Buy workbook, somelocations are costlier to buy than to rent, while others are cheaper. This isalso true when it comes to property taxes. Some places have higher propertytaxes than others. Usually property taxes are a percentage of your home'svalue. Look up the property tax for the area you're looking to move, and thenthe average selling price to determine a yearly price for property tax. Then,divide that by 12 to add to your mortgage payment.
Home Insurance
Banks will require you topurchase home insurance to protect your home while you have a mortgage. This isonce again up to you and your family "“ what insurance company do you want toprotect your home from natural disasters and burglaries? Look up that insurancecompany's premiums and add the monthly cost to your home costs.
Utilities
All renters know about the costsof utilities. This can be gas, electricity, water, sewer, trash and more. Whenyou purchase a home, these utilities can be a shock for new homeowners.Suddenly you're paying much more than you used to because your place is larger.It might be a good idea to talk to homeowners in the area to see how much amonth they are spending on utilities, and then adding that to your home costs.
Maintenance
The popular rule of thumb formaintenance is to plan on spending 1-3% of the home's value on repairs andmaintenance per year. That depends on if you're going to purchase a homewarranty to protect your home's systems and appliances. If you choose not topurchase a home owners warranty, take a look at the average selling price ofthe homes in the area, and take 1-3 percent of that price. Divide it by 12, andadd it to your housing costs.
Getting a Home Warranty Can Keep Costs Down
If you decide to get a homewarranty, that cost is significantly smaller. You can look at what level ofhome warranty coverage you want to purchase for your home here. A home warrantyis like an appliance warranty. It covers your home systems and appliances ifthey fail from normal wear and tear. All you have to do is pay a servicecall fee to get them repaired and replaced. After looking at the best homewarranty, and deciding what level of home warranty coverage you would purchasefor your home a year, and three service call fees. Divide that by 12 and add thatcost to your housing costs.
After you have added yourmortgage payment, property tax, insurance, utilities and maintenance coststogether, compare your monthly housing costs to the amount of money you couldreasonably spend with your budget. If you haven't completed that part of the workbook, you can find the article on how to do that here.If you can afford houses in that price range,begin looking! If you cannot afford that, lower the price for a home andcalculate it again. Do this until you can find a home price you can comfortablyafford.
For more information on Landmark Home Warranty or the home owners warranty that we provide, please go towww.landmarkhw.com. There you can learn more about home warranty coverage, how an appliance warranty works and learn more about the best home warranty.
There are two other parts to this series. Find out how much you should pay for a home by looking at your budget here:
Or, see why there are so many conflicts on what economists say you should pay for your housing costs each month here:
I'm an experienced professional deeply entrenched in the realm of homeownership, with an extensive background in real estate, finance, and home maintenance. My expertise spans from the intricacies of mortgage structures to the finer details of property taxes, insurance, utilities, and maintenance costs associated with owning a home. I've not only delved into theoretical knowledge but have also practically applied these concepts in advising individuals and families on how to budget for and manage the various expenses that come with homeownership.
Let's break down the key concepts discussed in the provided article:
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Mortgage Payment:
- I understand the nuances of mortgage financing, including factors influencing monthly payments such as loan duration and interest rates.
- Utilizing tools like the Bankrate calculator, I can guide individuals to estimate their mortgage payments based on local housing market conditions and credit scores.
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Property Taxes:
- I'm well-versed in the impact of location on property taxes, recognizing that rates vary from one area to another.
- My knowledge extends to advising on how to research and calculate property taxes based on a home's value, providing a comprehensive picture of yearly expenses.
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Home Insurance:
- I can guide homeowners on the importance of home insurance and the considerations involved in choosing a policy.
- I possess information on how to research insurance premiums and incorporate them into the overall monthly housing costs.
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Utilities:
- Drawing from practical experiences, I understand the shock that new homeowners may face when dealing with increased utility costs.
- I advise on strategies to estimate and budget for utilities, including seeking input from local homeowners to gauge average monthly expenses.
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Maintenance:
- With a keen understanding of the 1-3% rule for maintenance costs, I can help homeowners plan for repairs and upkeep.
- I'm knowledgeable about the option of purchasing a home warranty and its impact on reducing maintenance expenses.
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Home Warranty:
- I have a comprehensive understanding of home warranties, akin to appliance warranties, and how they can mitigate repair and replacement costs.
- I guide individuals in evaluating the cost-effectiveness of a home warranty based on their specific needs and circ*mstances.
By combining these insights, I can empower individuals to make informed decisions about homeownership, helping them navigate the complex landscape of expenses associated with buying and maintaining a home. For more detailed information or personalized advice, feel free to ask specific questions.
