Making the jump from renting to homeownership can be a very exciting time. But as a first time homeowner, you are likely to find that there are some hidden costs of homeownership — costs that you probably never thought about when you were renting.
Homeowner’s insurance often costs a significant amount more more than renter’s insurance because it covers the entire home in addition to personal property. Depending upon other factors such as the age of your home or whether or not you have a pool, the cost of home insurance can go up drastically. Here in California you should also consider purchasing earthquake insurance since it’s not covered under your standard policy.
Chances are your home is a great deal larger than your previous rental, so be prepared for more expensive utility bills. Always be mindful of how you’re using electricity and water and look for ways to save!
Maintenance and Repairs
Owning a home also means you’re responsible for all the maintenance and repairs. The costs can sneak up on you and add up quickly, especially in older homes. Possible maintenance and repairs include heating and cooling systems, plumbing systems, insulation, exteriors, etc. Every year, you should expect to spend some money on routine maintenance. If you keep up your routine maintenance, it will save you from having to shell out a lot of cash for a major problem.
Homeowners’ Association Fees
Homeowners’ association fees or HOA fees are in place in some neighborhoods as a way to collectively maintain and take care of the community. HOA’s are typically responsible for maintaining common areas (i.e. landscaping, sprinkler systems) and enforcing deed restrictions. Membership in a community HOA is often mandatory and members are charged a monthly or annual fee.
When purchasing a new home, factor in these items to your total budget to make sure that you are completely financially prepared for the costs of homeownership.