Budget Tips for Sneaky Homeowner Costs
Buying a home is a serious financial undertaking and while most people take obvious costs such as mortgage payments, taxes and insurance into consideration, some expenses are less obvious. To make sure you are prepared for any and all surprises, see our list of less common homeowner expenses to help you budget wisely and completely.
When a bank is calculating mortgage eligibility they employ what’s commonly known as the 28/36 rule. This assessment maintains that a borrowing household should spend no more than 28% of its gross monthly income on total housing expenses. These expenses are summarized by banks as PITI; principal, interest, taxes and insurance. This model, while widely used and extremely beneficial does not take into account monthly utility bills such as water, cable, trash, sewage, electric and gas. Research and realistic budgeting are a must for creating a viable budget. We recommend Bankrate.com, a free online service with a handy city and state cost of living calculator.
Interior and exterior maintenance
Contractors estimate that over a ten year period the interior and exterior maintenance of a home costs owners an average of $300 a month. This figure is rarely factored into the cost of buying and maintaining a home. Exterior costs include landscaping, snow removal, paint, gutter cleaning and roof replacement. The interior of a home demands carpet cleaning, floor treatments and appliance servicing and replacing. These costs, both small and large, add up quickly and contribute to the annual expense of homeownership.
Prepare for the worst
If a home is 10 years old, so to are the water heater and furnace. Issues will inevitably arise and a reserve of cash is recommended to curb them. New homes are no exception. A great way to avoid financial free fall is to buy less house than you can actually afford. Instead of the 28/36 paradigm, consider 20/28. This equation leaves the buyer better prepared for utilities, repairs, maintenance and other less predictable expenses.
Buying a home doesn’t have to be scary or stressful. When it comes to homeownership, preparedness and a healthy budget are the best line of defense against financial trouble.