Unexpected Homeowner Expenses
published on 04/03/2014
By Kenneth Wohl, VP, RCB Bank Mortgage
With mortgage rates still at historic lows and our local housing market strong with great inventory, it seems like a good time to buy. Before you purchase, there are a few expenses you should be aware of.
When you choose to buy a house, realize there are costs that go beyond your mortgage payment. Don’t be misled by websites that allow you calculate average mortgage payment options to determine your purchase price. These calculations are typically principle and interest based on the approximate rates, leaving out taxes and insurance.
Here are some costs other than principle and interest that you should be familiar with before taking the next step toward homeownership.
Home Owners Insurance - You are responsible to carry insurance on your entire property not just the contents. This insurance covers you in case of a fire, tornado or other possible loss (not flood). Typically this is wrapped up in your monthly payment and put into your escrow account to be paid to your insurer yearly. These premiums can, and most likely will, increase from year to year causing your monthly payment to increase to cover rising costs.
Property Taxes - As a homeowner, you are also responsible for paying annual taxes on your property. Like insurance, your taxes are probably paid through your escrow account and will likely increase from year to year. If purchasing a newly constructed home from a builder, more than likely the county has not yet assessed it. If that’s the case make sure your lender calculates an estimated tax cost vs. actual which will be significantly lower based on the non-assessment.
Utility Bills – As a renter, some landlords and apartment complexes cover water, cable/internet, trash, and even electricity costs. As a home owner you’re responsible for all services to your home, including electric, water, gas, sewer, trash pickup, landscaping, homeowners association dues.
Ongoing Maintenance - When you wake up to a backed up toilet or broken hot water heater in an apartment, you call your landlord to fix it. As a homeowner you are now responsible. If the hot water heater breaks, you have to find a plumber, purchase a new hot water heater, buy parts, and pay the bill. You will need to have a cash reserve fund available for emergencies like this - you never know when you might have a busted water pipe, broken air conditioner, or have to replace your lawn mower.
Owning a home can be a great thing! Be sure you are prepared for any and all financial costs associated with owning one before you decide to purchase.
I’m happy to answer any questions you might have about mortgages, even if you are not an RCB Bank customer. You can reach him by phone or email at 405-608-5291, firstname.lastname@example.org.
Opinions expressed above are the personal opinions of Kenneth Wohl, and meant for generic illustration purposes only. For specific questions regarding your personal lending needs, please call us at 855-BANK-RCB. Member FDIC and Equal Housing Lender. RCB Bank NMLS #792151.