Are you ready to buy your first home? Before you jump the gun and head down to the title attorney’s office, consider the following.
Most new homeowners are (unhappily) surprised at the amount of hidden costs that come from owning a home. Even if you think you have an idea- multiply it by two or three times to get a more realistic number on what to expect.
For example, homes are constantly requiring some kind of maintenance. If your home has wood siding, it needs new paint every 5-10 years (some people say 3-5 years). Water heaters, air conditioning units, washing machines, and other appliances break.
The yard requires constant care to keep out weeds. Grass needs to be mowed at least once a week in the summer- this takes a lot of time or a decent budget to pay someone to do it.
And what we’ve discussed doesn’t even include the higher utility bills, need for more décor, lawn tools, homeowner association fees and more.
The Real Cost of a Home
Interest is a nasty thing when working against you. Even with a moderate interest rate, most homes will end up costing its owner DOUBLE what you signed a loan for to purchase it.
There are ways to reduce the interest of course. You can pay a very hefty down payment, which will make a big difference over the long run. But do you have the savings to do that? Especially with the anticipation of the home needing repairs and new things?
You could also pay extra each month towards the principal. Most people don’t realize how big of an effect that can have in the long term for what you pay for the house. The problem is that’s money flowing out of your pocket that you may need for other things.
Quality of Life
Some aspects of your quality of life will improve when you buy a home. For example, you’ll have more room to “spread out.” Guys may be able to get that “man cave” they’ve always wanted. Ladies get a larger kitchen, room for a nice washer and dryer, and plenty of room to plant a garden.
But not everything is roses and big screen TVs. If you buy a home in the suburbs, you might have a long drive to and from work every day. You’ll always have things that need work around the house, and whether you pay someone to do it or do it yourself- you’ll always that mental to-do list in the back of your mind.
These things aren’t meant to scare you- far from it. Owning a home is a nice luxury that many people don’t get to experience, and it can bring you a lot of joy you just can’t get from an apartment or condo. Just keep in mind that most opportunities have their dark side, and owning a home is the same way.
The bottom line is that if you have some cash saved up to deal with maintenance and emergencies- and you understand the real total cost of a home- go ahead! Purchase it, set up a hammock in the backyard, and enjoy. But if you aren’t 100% prepared yet, consider putting it off a few more months so you can get ready.