What Are the Hidden Costs of Buying a House?

Buying a home is both exciting and nerve-wracking. If this is how you are feeling, you are not alone! Millions of homebuyers have been in your shoes, and most of them have been surprised by the extra expenses involved with home ownership. In this post, we help you prepare for these expenses by reviewing the hidden costs of buying a house.

Property Taxes

Property taxes help pay for municipal services like road maintenance, police and fire service. Although renters also pay these taxes as part of their rent, you will be more aware of them once you own a home because you will receive a bill for them.

Property taxes are determined by your township, city, or county and are normally based on the value of your home. These taxes vary widely from state to state and county to county. Here are the five lowest and the five highest property tax rates by state and county.

By choosing the right location, you can cut down on these hidden costs of buying a house.

Closing Costs

Once you have closed on the deal for your home, you will encounter one of the most easily overlooked hidden costs of buying a home: closing costs. These can include:

• Credit report fee
• Appraisal fee
• Home inspection fee
• Title search fee
• Title insurance (lender’s and owner’s)
• Attorney’s fees
• Recording fees
• Transfer taxes
• Escrow fees
• Prepaid property taxes
• Prepaid homeowners’ insurance
• Prepaid interest
• Private mortgage insurance (PMI) upfront premium
• Flood certification fee
• Survey fee

Note that not all these fees apply to every home purchase.

HOA and Condo Fees

Another common hidden cost of buying a house is monthly fees for shared amenities and services. Condo owners normally expect these, but even detached homes may be subject to Home Owners Association (HOA) fees. These fees cover maintenance of building exteriors, snow removal, swimming pool cleaning, improvements and more. On the positive side, these hidden costs of buying a house mean you do not have to take care of these issues yourself, and you may actually save money by pooling your resources with others.

Homeowners’ Insurance and Mortgage Insurance

If you do not already have renters’ insurance, these expenses will be one of the hidden costs of buying a house. Homeowners insurance is usually required by lenders and recommended even if you pay cash for your home. Homeowners’ insurance costs have risen in recent years, and there are exclusions depending on the region’s environmental risks.

Mortgage insurance is mandatory if you have a downpayment of less than 20%. However, this hidden cost of buying a house is removed when your equity in the home reaches 20%. You can save quite a bit by putting more money down or by making extra payments toward your principal.

Home Maintenance and Repairs

You will have had a home inspection before closing on your house, but problems may have gone unnoticed. Be prepared to encounter these hidden costs of buying a house:

Roofing

The lifespan of roofing is long but not infinite. Asphalt shingles, for example, last an average of 20 years. Your roof might have looked fine upon inspection but may need replacement a few years later.

Plumbing, HVAC, and Electrical System Repairs

Home inspections are limited to what the inspector can see at a visual inspection. You may still have maintenance issues behind your walls that need to be taken care of soon after you take possession. These hidden costs of buying a house are often needed to ensure safe and efficient functioning of the home. Mold can also be hidden behind walls and will need to be remediated right away.

Structural Repairs and Maintenance

Serious issues such as foundation cracks, drainage problems, termite damage, and overgrown tree roots can impair the structural integrity of your home and can be overlooked in a visual inspection.

Ongoing Utility and Service Costs

New homeowners need to be prepared for periodic expenses. These hidden costs of buying a house include:

• Electricity, heating, and cooling
• Lawn maintenance and snow removal
• Garbage and recycling fees
• Trash and recycling fees
• Internet and cable service

The Silver Lining

Despite these hidden costs of buying a house, home ownership does have its advantages.

Home Equity Growth

One of the biggest benefits of homeownership is the ability to build equity over time. Rising home values further contribute to this. In addition to the pride of having equity in a home, owning a bigger share of a house allows you to borrow against it.

Stability and Predictability

Unlike rent, which can increase annually, a fixed-rate mortgage provides payment stability over time. This allows you to budget more effectively and avoid the unpredictability of rising rental costs. In high-demand markets where rent has skyrocketed, owning a home may actually be the more cost-effective option in the long run.

Tax Benefits

Homeownership comes with certain tax advantages that can offset some of the hidden costs of buying a house. Mortgage interest, property taxes, and certain home improvements may be deductible, depending on the regulations in your state. If you work from home, you may also be able to write off some of your mortgage and home office expenses from your taxes. Be sure to take advantage of these tax breaks.

Potential for Rental Income

If you have the space, you may be able to rent out a portion of your home, a basement unit, or your entire home as a short-term rental. This strategy can help cover mortgage payments or provide extra financial flexibility.

While there are hidden costs to buying a home, the potential for long-term wealth accumulation and financial stability make it a smart investment. With careful planning and budgeting, you can manage the expenses while reaping the rewards of property ownership.

Do you have questions about the hidden costs of buying a house? REMAX is here to help you figure it all out. Contact a REMAX agent today for more guidance!