While grants may help offset the costs of purchasing a home, once you're a homeowner, you may find there are several expenses you didn't expect. Ideally, you'll consider these potential expenses before making your purchase so you can afford the costs.
Closing Costs
Every person who buys a home is responsible for paying closing costs. In some cases, sellers entice buyers by offering closing cost assistance, making it easier for people who have less cash upfront to enter the market. Closing costs vary and can be as much as five percent of the purchase price of the home. In Australia, the average purchase price of a house in 2016 was $656,800, which means closing costs could exceed $32,000. Local regulations and your loan can affect the closing cost amount, which means even if you know about closing costs, you may not be able to project the exact amount owed.
Interest
One way to prepare yourself for the potential interest costs is by using iSelect's home loan comparison tool. The tool will outline your mortgage options, the interest costs, and the terms of the loan. The interest rate for your mortgage will affect your monthly payments. If you opt for a variable rate, your mortgage payments will increase when interest rates increase and decrease when interest rates decrease. You may opt for a fixed-rate mortgage, which lets you lock in a set interest rate for up to five years. With a fixed-rate mortgage, you will have to renegotiate the rate once your current contract expires. If interest rates are high, your payments could increase.
Property Taxes
Every homeowner must pay property taxes. The tax amounts are based on the assessed value of the home. Property taxes are used by both state and local governments to fund things such as transportation costs and emergency services. In some places, individuals are required to pay an additional school tax based on their residence.
HOA or POAA Fees
Homeowner's associations (HOAs) became popular in the United States in the 1960s, and almost a quarter of all homes in the United States belong to an HOA. In Australia, a similar organization called the Property Owners' Association of Australia (POAA), exists. If your property belongs to an HOA or POAA, you may be required to pay monthly fees to support the organization. Your property can also be subject to fines if you do not comply with their regulations. These organisations establish specific rules residents must follow, such as identifying the types of plants people can have on their property, the style of fence homeowners can install, and the colour options for front doors.
Home Maintenance
Even a new home requires routine maintenance. For example, your air conditioning and heating system should be inspected annually to ensure it's working correctly. Keeping the ducts clean can help air circulate effectively and reduce heating and cooling costs. Replacing filters will ensure your system is not circulating dirty air or working harder to disperse air. Other routine maintenance costs include caulking windows and tubs to maintain the seals, power-washing siding to remove mold and dirt, removing leaves and debris from your yard, and replacing broken window screens.
Emergency Repairs
If a critical system in your home breaks down, you may need to spend hundreds or thousands of dollars repairing it. One example would be a backup in your plumbing system that sends sewage into your home. Emergency repairs may also be required after a storm. For example, heavy snow or ice can cause your roof to collapse. A wind storm or hurricane could remove shingles or siding. Branches and debris could break your windows. Although your insurance may cover some of these costs, you may still be required to pay a deductible fee when you make a claim.
Insurance
If you own a home, you need to have insurance for your property as well as your belongings. This insurance protects you in the event a flood or tornado destroys their home. It can also cover emergency repairs.
Homeowners may also be required to purchase mortgage insurance. This insurance protects lenders. If the homeowners default on their mortgage, the lender will be protected from losses on the loan.
Every person who buys a home is responsible for paying closing costs. In some cases, sellers entice buyers by offering closing cost assistance, making it easier for people who have less cash upfront to enter the market. Closing costs vary and can be as much as five percent of the purchase price of the home. In Australia, the average purchase price of a house in 2016 was $656,800, which means closing costs could exceed $32,000. Local regulations and your loan can affect the closing cost amount, which means even if you know about closing costs, you may not be able to project the exact amount owed.Interest
One way to prepare yourself for the potential interest costs is by using iSelect's home loan comparison tool. The tool will outline your mortgage options, the interest costs, and the terms of the loan. The interest rate for your mortgage will affect your monthly payments. If you opt for a variable rate, your mortgage payments will increase when interest rates increase and decrease when interest rates decrease. You may opt for a fixed-rate mortgage, which lets you lock in a set interest rate for up to five years. With a fixed-rate mortgage, you will have to renegotiate the rate once your current contract expires. If interest rates are high, your payments could increase. Property Taxes
Every homeowner must pay property taxes. The tax amounts are based on the assessed value of the home. Property taxes are used by both state and local governments to fund things such as transportation costs and emergency services. In some places, individuals are required to pay an additional school tax based on their residence.
HOA or POAA Fees
Homeowner's associations (HOAs) became popular in the United States in the 1960s, and almost a quarter of all homes in the United States belong to an HOA. In Australia, a similar organization called the Property Owners' Association of Australia (POAA), exists. If your property belongs to an HOA or POAA, you may be required to pay monthly fees to support the organization. Your property can also be subject to fines if you do not comply with their regulations. These organisations establish specific rules residents must follow, such as identifying the types of plants people can have on their property, the style of fence homeowners can install, and the colour options for front doors. Home Maintenance
Even a new home requires routine maintenance. For example, your air conditioning and heating system should be inspected annually to ensure it's working correctly. Keeping the ducts clean can help air circulate effectively and reduce heating and cooling costs. Replacing filters will ensure your system is not circulating dirty air or working harder to disperse air. Other routine maintenance costs include caulking windows and tubs to maintain the seals, power-washing siding to remove mold and dirt, removing leaves and debris from your yard, and replacing broken window screens.Emergency Repairs
If a critical system in your home breaks down, you may need to spend hundreds or thousands of dollars repairing it. One example would be a backup in your plumbing system that sends sewage into your home. Emergency repairs may also be required after a storm. For example, heavy snow or ice can cause your roof to collapse. A wind storm or hurricane could remove shingles or siding. Branches and debris could break your windows. Although your insurance may cover some of these costs, you may still be required to pay a deductible fee when you make a claim.Insurance
If you own a home, you need to have insurance for your property as well as your belongings. This insurance protects you in the event a flood or tornado destroys their home. It can also cover emergency repairs. Homeowners may also be required to purchase mortgage insurance. This insurance protects lenders. If the homeowners default on their mortgage, the lender will be protected from losses on the loan.
Till next time... hope this article helped those property shopping!
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