The costs of homeownership

First-time home buyers tend to focus their attention on their monthly mortgage payments and the other costs associated with buying a home. But owning a home entails new expenses as well. Here are some of the items that belong in a typical household budget:

Property taxes and homeowner’s insurance
Property taxes, which may be levied by state, county and/or local government authorities, are often one of the highest costs of homeownership. These taxes may be payable annually or biannually and may be per-parcel or "ad-valorem," which means based on the value of the property. Some localities also assess separate levies for schools, roads or other public works or services. The tax assessor’s office is a good resource for more information on tax rates in your area.

Homeowner’s insurance is another crucial budget item. This type of insurance guards against financial loss in the event of a fire, burglary or certain other casualties. An additional separate policy may be advisable if the local area is susceptible to floods, earthquakes or other natural disasters. Some homeowners set aside sums for property taxes and insurance each month through an escrow or impound account maintained by their loan servicer.

If the home you’re thinking of buying is located within the jurisdiction of a homeowner’s association, the association typically will assess monthly dues for common-area maintenance, landscaping, gated security and/or other services. Some associations can collect special assessments for major repairs as determined by the association’s board of directors.

Maintenance, repair and replacement
Homeowners also face periodic costs for lawn and yard care, snow removal, pest control, maintenance of heating, ventilation and air-conditioning (HVAC) systems and the like. Periodic replacement of aged appliances, dilapidated flooring or carpeting, and the roof are other typical expenses. All of these costs vary widely around the country depending on weather conditions and the age, type and size of the home.

Do-it-yourselfers can cut labor costs, but will need to purchase tools, supplies and materials for maintenance, repairs and home improvements.

Utilities are another budget item for homeowners. Monthly costs for electricity, gas, water and heating oil vary depending on weather conditions, the age and size of the home and individual usage.

New homeowners who’ve purchase a larger residence may have a fair amount of additional space to furnish with either brand-new items or second-hand goods from garage sales or thrift shops. Collect catalogs for decorating ideas.

Remodeling or updating an older home to modern tastes can add to those costs even if the changes are primarily cosmetic. Fresh paint, refinished hardwood floors, new landscaping or a remodeled kitchen or bathroom, for example, can become major projects in the early or later years of homeownership.

REALTORS® can reveal homeowner expenses
First-time homeowners may wish to ask friends and relatives for information about the typical costs of homeownership in the local area. REALTORS® also may be familiar with such expenses, and home sellers may be willing to provide copies of utility bills along with the names and telephone numbers of reliable contractors who are familiar with the home.

The costs of homeownership may sound daunting, but many homeowners find that budgets and savings accounts can help manage these expenses. Setting aside sums every month is a good way to prepare for taxes, insurance and repairs.

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