I meet with women every week to assist developing and achieving their financial goals. The top two things women want help with is saving more money and buying a home. Heck, who am I kidding, not too long ago those were my top two financial goals! Having recently become a homeowner, I must tell you it’s not all it’s cracked up to be.
Don’t get me wrong, I am extremely thankful for my home and the fact that I now own a piece of America, but I have some pretty strong reasons for wanting to go back to renting.
- Maintenance costs. Homeowners are responsible for ALL of the maintenance issues and costs. I purchased my home three years ago, and every year I’ve had an issue with my air conditioner unit. To avoid the astronomical costs, I purchased a home warranty which costs between $500-$600 per year or $60 per month. Even with that warranty, I have to pay a deductible, and not every maintenance problem is covered. I recommend that when you have least 3 months of expenses for these potential issues.
- Your mortgage payment is not the only payment. Most mortgages have the taxes and insurance included in the payments. If not, you must pay that plus the mortgage payment. So that $1,000 payment could easily increase by $300 per month if taxes and insurance are not included. IF those are included, there are other expenses to consider such as, lawn care and equipment, pest control, and the required termite bond. These are expenses you do not learn about until you are settled in the home.
- Property tax increase. If your property’s value increases, which is one of the major goals of home ownership, you real estate taxes are likely to increase. This increase is passed along to you in your annual tax bill. So a payment that starts out at $1,200 per month can increase to $1,475. The opposite could happen also, making your home worth less than you owe and difficult to sell as we saw in the 2007-2008 real estate decline.
- Limited access to equity. Ideally real estate values should increase, that increase allows you as the owner to earn money on your home. The money earned is called equity. If you purchased your home for $100,000 and five years later it’s now worth $150,000, you have $50,000 of equity. Unfortunately this money is not readily available. You must apply for access through the lender. The application requires that your credit worthiness be assessed for access to your own money. For example, if you were late on a couple of payments because you became ill or lost your job you may not be approved to access to your money!
- Increased utility costs. Most people buy a home because they want or need more space. With more space comes increased utility expenses. You can expect that Your utilities will increase when you purchase a home. In some cases, utilities such as water and even cable are included in the rent, making it cheaper than home ownership.
There are many benefits to home ownership. However, I encourage you to thoroughly investigate ALL of the expenses associated with owning a home. Your financial season will be a good indicator if home ownership is right for you. If you need help making this important decision, contact me at: DrApril@Broke-ism.com