Understanding the Hidden Costs of Homeownership
When you shop around for a home, your focus is on the asking price. There might be negotiations during this period until everyone arrives at an agreeable value. The thrill of purchasing a home is unmatched in life, especially if you negotiate a truly low price. However, there are other costs to homeownership that are above and beyond the property's price tag. Take a moment to evaluate the hidden costs of buying a property so that you're prepared for the investment.
When you rent an apartment, many properties include the utility costs in the monthly charges. You may not even know how much sewage or water costs in today's marketplace. Purchasing a home is an entirely different situation, however. You'll have utility costs for electricity, gas, water and other municipal resources. These charges add up if you tend to use one more than another, such as electricity during a hot summer day. Be aware that you must budget for these expenses as well as the standard, mortgage payment.
The Escrow Account
Your financial lender may ask you about starting an escrow account. This complex term is actually a helpful, savings venture. Each month, you put a certain fraction of money into the escrow account to cover biannual property taxes and insurance. This account is normally attached to your mortgage payment so that you only pay a lump sum each month to the escrow, principal and interest. The bank pays off the taxes and insurance for you. Be sure that your mortgage payment has all of this included in it or else you'll have large bills only a few months after the property purchase.
When you were purchasing the home, you paid very little upfront in the form of fees. As a homeowner, however, you need to pay for home inspections when you want to refinance or sell the property. These inspections are critical to a rapid sale, but they cost several hundred dollars. A solid sale depends on your investment in these inspections so be sure to save up for one or two as you contemplate a future transaction.
Renters have the advantage of avoiding most repair costs. They simply call their landlord for help. As a homeowner, you constantly fix minor issues around the home. From swapping out the HVAC thermostat to adding new curtains to the windows, basic maintenance is a cost that can range from several hundred to thousands of dollars.
Aside from saving up for basic maintenance, you should also have a secondary fund that covers capital improvements. Foundation repair or roof replacements are incredibly expensive, but they can be affordable if you save up over several years. From the moment that you take ownership of a property, start saving up for these repairs. They are required and critical to the home's longevity and value.
Real-estate agents can answer many of your questions as the purchasing process moves forward. If any charges, including the closing costs, appear unusual then it's important to speak up. Because Calgary real estate will probably be the biggest transaction during your lifetime, you should understand all of the line items in the contract. With every item written into a legally binding contract, you're ready to commit to the property wholeheartedly.