3 Often Overlooked Expenses in Home Ownership
Perhaps your family has outgrown the small apartment you’re currently renting, or maybe you want to expand your already thriving collection of vacation properties. Whatever your reason might be for purchasing a new home, it’s important to ready your bank accounts for this major undertaking.
Recent months have witnessed record-breaking mortgage rates around 2.87%, which has contributed to an influx of new interest in the real estate market. As tempting as it may be to jump on an offer as soon as it presents itself, you’ll want to make sure you are financially equipped to handle the many underlying costs of homeownership.
With few exceptions, houses are the single largest expense you will take on in your lifetime. In part, this is because the process of buying and upkeeping a home includes a series of all types of expenses—some more apparent than others. Without exceptions, the costs of purchasing real estate stretch far beyond your mortgage loan, and homeowners who prepare for these expenses are sure to reduce the stress caused by a lack of financial planning.
Make sure you’re prepared for these additional expenditures that could creep up on you along the way.
Unless you’re purchasing a brand new home, your house’s appliances—everything from the dishwasher to your HVAC system—will vary in their current condition. You might be able to get by without a functional microwave, but larger appliances like your air conditioner unit could make life uncomfortable or entirely unfeasible.
That’s why it’s important to financially prepare yourself for maintaining or replacing your home’s existing appliances. A good home inspection is a great place to start, as many professional inspectors will survey appliances that are considered permanently built in to your home. Even if the home you plan to purchase has appliances that will need updating relatively soon, knowing this ahead of time offers a valuable bargaining chip during negotiations.
Securing your home appliances also arrives in the form of a home warranty, where a smaller monthly payment can help cover appliance-related costs as they arise. Warranties work well for tenants—who can lump the monthly cost of the warranty into their rent fees—as well as individuals purchasing older homes. There are a number of home warranty providers on the market, so make sure to do your due diligence and research your options before sealing the deal.
As with any other major purchase, you want to make sure that your new house is properly protected and insured in order to safeguard your personal assets. In the event that a property is bought or sold, a record of that transaction is created and stowed away in a public archive.
But what happens when there are mistakes on this record and the status of the home’s ownership? If you aren’t able to ensure that your deeds are properly filed, you could run into issues with extenuating liens, which can total thousands of dollars.
That’s where legal defenses like title insurance come into play. For those unaware, title insurance effectively defends you against current liens, errors in the transaction’s records, or any other mistakes that could negatively impact your title as the current owner. Title insurance companies do the work for you to investigate your home’s records and correct these often costly mistakes when possible. A well-insured home could end up saving you thousands in the long-run, and defending your title is certainly an essential piece of the larger insurance puzzle.
One of the most overlooked expenses that comes with purchasing a new home, rental property, or other residential estate isn’t a direct cost at all, but instead has to do with the value of your home within the larger market. As this article suggests, buying a home is much more than choosing a place to live, and the value of your house may vary depending on several external factors, such as the neighborhood at large or proximity to a body of water.
Though it’s impossible to directly predict the state of the market over the next 10 or 20 years, there are a few things you should keep in mind in order to have your home increase in value from the time you purchase to move-out day. Keep an eye out for the price tag on other homes in the area, as they can indicate the price range you should stick to as you enter negotiations. Periods of high-interest rates may also impact your home’s value when it comes time to sell, as there will be far fewer interested buyers.
You might not be able to control the local housing market, but there are some measures you can take personally to maximize the value of your home. Older homes often depreciate in value over time if they are in constant need of repairs, but investing in new appliances and DIY projects can combat any losses of investment. Larger endeavors, such as building out a new room or installing outdoor living areas, will not only boost the square footage of your home’s usable space, but it will also make the property that much more attractive when you decide to sell.