It’s not just the mortgage…

There’s a lot of stress involved in buying a home. From the countless weekends you’ll spend going to open houses to signing all of the closing paperwork, it’s A LOT. And that doesn’t necessarily end when you finally own a home. Being a homeowner comes with a whole other set of stressors. 

The key to avoiding at least some of the pressure that comes with owning a home is to make sure you’ve thought about all of the expenses you’ll need to make space for in your budget. 

If you’re on the market for a home, take a look at the list below to make sure you’ve thought about how you’ll incorporate these expenses into your budget. And, if you already own a home, take a moment to make sure your budget covers all of the necessary items.

Home maintenance

This is a big one. Just like cars, homes need regular maintenance. Sometimes you’ll have small expenses here and there, and other times you’ll be hit with a hefty bill. But, because maintenance is something you can anticipate, start setting money aside now so you have some cash available when the water heater breaks. 

In terms of how much, a general rule of thumb is to set aside between 1 and 2 percent of your home’s purchase price each year to cover maintenance. For example, if you buy a $100,000 home, you’d set aside $1,000 – $2,000 per year. Even though you might not use that money every year, keep rolling over what you’ve saved so that when you get a big bill to fix a pipe that burst, you have enough to cover it.

You can also determine how much you want to set aside based on a few factors like the age of your house, how big it is, and the condition it’s in. If you know your home will need a new roof soon, try saving more. Or, if you have a condo with no yard, you can save a bit less since lawn maintenance won’t be your responsibility. Here are other things you might include as maintenance: 

• Painting
• Cleaning, resurfacing or replacing flooring or carpets
• Tools for yard maintenance
• Repairing or replacing appliances
• Repairing leaks
• Pest prevention or extermination
• Cleaning or replacing gutters
• Fence and deck repair
• Siding repair or replacement
• And there are many more!

If you have the time and energy, you could probably tackle many of these yourself. If so, you’ll need to buy the equipment in order to do the task. Otherwise, you might turn to a professional service to help get the job done. No matter what you decide, you’ll need some cash to maintain your home. Make an Annual Envelope for Home Maintenance in Goodbudget and start setting money aside.

Utilities

Oftentimes landlords will include things like water and garbage in the rent they charge, which makes it feel like you’re getting those services for free. When you own a home, you’re on the hook for all of it. And depending on the size and location of your home, you might pay even more for the utilities than you were used to paying. Be sure you’re factoring these things into your budget: 

• Gas
• Electricity
• Water
• Garbage
• Internet

And, it’s worth mentioning things like cable and phone services that you might want to upgrade. If those are something you think you might want to purchase, think about how you’ll work them into your budget now. 

Property taxes

You’ll generally pay property taxes once or twice a year depending on where you live. They’re calculated by multiplying the tax rate by the value of the home. Your tax payments fund things like schools and road maintenance, which are all great things! But we all might be a bit reluctant to write such a large check on top of all the other bills we pay. You might have an escrow account that collects this monthly, which can be nice since you won’t have to pay one large lump sum. If not, set up an Annual Envelope in Goodbudget so that you can set a little bit aside each month so you’re ready when the bill comes.

Homeowners insurance

Just like a car, your home needs insurance too because anything can happen! Homes can flood and get broken into and insurance is there to help cover those costs when they do. If you have an escrow account set up by your lender then your mortgage company can make those insurance payments on your behalf. If you don’t, then be sure you’re saving with an Annual Envelope. 

Speaking of insurance, if you used a loan to purchase a home, you might be required to pay for private mortgage insurance if your down payment counted for less than 20% of the home’s purchase price. This is a monthly fee that’s usually included in the mortgage payment. PMI can cost between 0.5% to 1.0% of the entire loan amount every year, which isn’t small. So be sure you’re factoring that in and making adjustments where you can. 

So this might seem like a lot! And it is. But having a well-planned budget will help you save for those large maintenance costs that will definitely come, as well as those everyday essentials that you need to spend on to keep the wheels turning. And hopefully with as little stress as possible.