November 2nd, 2015 8:54 AM by Jackie A. Graves
We all know that buying a home is a big financial
decision—likely among the largest you will make your life. So what is all your
money going toward, really? It goes far beyond just principal and interest on
the actual home. Check out this list of monthly expenses you will likely
encounter as a homeowner.
If you aren’t paying for your home upfront in cash, you will
have to finance it. Your monthly mortgage payment goes toward the amount you
originally borrowed (principal) and the interest on that principal. The amount
is calculated based on how much you borrowed, the interest rate you and your
lender agreed upon, and the length of the loan.
Your credit standing has a big influence on what your
interest rate will be and thus the size of your payments; checking your credit before
you shop for a home is wise. (You can get a free credit report summary,
updated every 30 days, at Credit.com.)
Taxes can add hundreds of dollars to your monthly bills, but
they help cover valuable public expenses such as community safety, schools,
infrastructure, and more. Depending on where you live, you will incur different
tax rates. Property taxes are calculated by local government and
are usually based on your home’s assessed value.
Between basic homeowners insurance, which offers protection
against fire and theft, and private mortgage insurance,
which protects your lender against your defaulting on the loan if your
down payment was less than 20% of the mortgage value, insurance can be a big
item in your monthly budget. And don’t forget that you may need additional
coverage against things such as floods or earthquakes depending on where
your home is located.
Owning a home means you are responsible for repairs and upkeep,
unlike when you rent. It’s important to have money set aside in your budget to
cover everything from small do-it-yourself jobs to the serious issues that
inevitably come up from time to time. Hopefully your home inspection can help
prepare you for the life expectancy of major components such as the
roof, plumbing, and electrical system.
Every month, you have to pay your utility bills, from heating
and cooling to electricity, natural gas, and water. These can fluctuate
throughout the year based on outside conditions such as temperature and
humidity. It’s a good idea to budget for this variable expense by looking at
the previous year’s usage.
If you purchase property in a condominium- or townhome-type
community covered by a homeowners association, you will have to pay yearly or
monthly fees to maintain common areas and other shared expenses.
The bottom line: Prepare yourself. It’s important to understand
the full costs of homeownership. Do your best to know what is coming and create
a comprehensive budget that accounts for the whole package.
Written by AJ Smith – To view the original article click here