“Nine Essential Homeowner Expenses to Budget For”

“`html

Understanding the True Cost of Homeownership

When determining how much house you can afford, it’s essential to consider more than just your monthly mortgage payment. Homeowners should be prepared for various expenses beyond the mortgage, including taxes, insurance, utilities, and repairs. Here’s a comprehensive guide to nine non-mortgage homeowner expenses to factor into your financial planning.

1. Property Taxes

Property taxes fund public services and infrastructure such as schools and street maintenance. Tax rates vary by location, but generally, you’ll pay a flat rate multiplied by your property’s assessed value. For instance, if you purchase a home for $400,000 with a local tax rate of 1.5%, your annual property tax bill will be $6,000. This can be paid as a lump sum or in installments, depending on local policies. Some mortgage lenders may collect a portion of your annual property tax bill with your monthly mortgage payment.

2. Homeowners Insurance

Homeowners insurance rates have been increasing in recent years. According to Matic, the average premium rose 8.6% to $1,700 for new policies in 2023. Comparing policies from multiple insurance companies can help you find the best value. Online tools can assist in comparing quotes from various providers.

3. Private Mortgage Insurance (PMI)

If your down payment was less than 20%, you might need to pay for PMI, which protects the lender if you default on the loan. PMI can be paid upfront at closing or included in your monthly mortgage payment. Costs typically range from 0.5% to over 2% of the loan amount annually. Your exact PMI costs will be detailed in your closing documents.

4. Utilities

Basic utilities such as electricity, gas, water, trash, and internet will add to your monthly expenses. Additional services like cable, streaming, or home security can further increase costs. You can inquire about utility bills when buying a home to estimate monthly costs. Energy-saving appliances and reducing energy and water usage can help lower utility bills.

5. Homeowner Association (HOA) Fees

HOA fees for condos, townhomes, or managed communities add to your monthly housing expenses. These fees may cover insurance, utilities, or maintenance of common areas and amenities. While HOA fees can be substantial, they may replace some common expenses like utility costs.

6. Routine Maintenance

Maintaining a home is an ongoing task. Routine maintenance includes cleaning, HVAC service, pest control, roof replacement, and plumbing repairs. Skipping maintenance can lead to higher repair costs later. Angi estimates the average homeowner spent $2,458 on home maintenance in 2023.

7. Landscape and Pool Maintenance

Outdoor spaces require maintenance and repairs. Lawn mowing services range from $50 to $250 per mow, and tree trimming averages $1,800. Pools add an average of $230 to monthly maintenance costs, with repairs ranging from $85 to $3,200.

8. Emergency Repairs

Emergency repairs are unpredictable and can be costly. A typical roof replacement costs $9,267, while a water heater replacement averages $1,303. Creating an emergency repair fund is essential. Some repairs may be covered by homeowners insurance, but deductibles and non-covered expenses can add up.

9. Appliances

Appliances have a lifespan of five to 17 years. The National Association of Certified Home Inspectors provides estimates for common household appliances. HomeAdvisor estimates an average cost of $2,175 for each new appliance. Preparing for appliance replacement is crucial.

How to Save for Homeowner Expenses

Include recurring home expenses like mortgage payments, utilities, and HOA fees in your monthly budget. For planned and unplanned repair and maintenance expenses, consider these strategies:

• Emergency Fund: Financial experts recommend keeping three to six months’ worth of expenses in a high-yield savings or money market account for unplanned expenses like emergency home repairs.
• Sinking Funds: Create sinking funds for property taxes, appliance replacement, repairs, or renovations. Budgeting 1% to 4% of your home’s value for an all-purpose maintenance fund is another approach.

The Bottom Line

Recognizing the various costs of homeownership is the first step in managing them. Understanding how to account for taxes, insurance, maintenance, and repairs can help you set a realistic budget and create a savings plan. For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to assist you in making informed financial decisions for your home.

“`