You are almost there. You have spent years and months saving for a deposit. You have meticulously compared mortgage rates and found the best lender. Your offset account is ready, and you have found your dream home. It’s almost time to sign the dotted line and own your very own piece of this great land.
But should you?
Let’s say, after comparing lenders, you managed to find the best value home loan on the market. Great! You have a clear idea of how much you will be spending on repayments, fees, and other home loan related expenses. Excellent! But are you aware of the hidden costs involved in homeownership?
Some of these hidden expenses could have disastrous effects on your finances if you aren’t ready to handle them as they arise. What hidden expenses? How much money should you put aside? Is there any way to minimize these costs? Let’s have a look at the true cost of owning a home.
If it’s broken, you must fix it.
By far, the biggest hidden expenses of owning a home are repairs and maintenance. Depending on the age and condition of the building, maintenance of a home can be cheap and easy, or it could be a nightmare, an endless pit that sucks your bank account dry. A good example of scheduled maintenance would be a coat of paint to the home’s exterior.
In a location with mild weather, you may only have to repaint your home every ten years, but this could go down to as little as five years if you buy into an area with extreme sun or cold weather. Depending on the size of your home, a few coats of good quality paint could cost a couple of thousand dollars, and that’s if you paint the home yourself.
Painting is an easy task compared to some maintenance, and much cheaper. Significant structural damage could cost you tens of thousands of dollars to repair, and may leave you homeless for months. Owning a home is not all about the monthly repayments; you need to be responsible and prepared for the worst.
Fees and rates.
Other hidden costs surround a home that doesn’t involve water damage or freak accidents. Local councils will charge homeowners fees for holding land in their area; these fees are called rates. These rates are usually calculated on the base value of your land, to ensure all homeowners pay similar rates.
While council rates aren’t going to send you bankrupt, they can be several thousand dollars and must be paid every year. Other hidden fees can arise from your home loan, depending on your lender. If your lender charges you upkeep fees on your home loan, make sure you know them.
Pay for what you use.
If you are used to renting, it’s rare for you to pay for your water usage. This is not the case if you own a home, and if you use a lot of water, your first water bill might come as quite a shock. A homeowner is responsible for the connection of utilities, which may incur one of set up fees. Owning a home isn’t a set and forget investment; it takes lots of money and time to set up correctly.
Owning a home is a big responsibility; big expenses can pop up out of nowhere, and if you are left without a place to live or the ability to make repayments, you could be in big trouble. You have been on a budget for years, saving and planning for your dream home, good work! If you feel like you are ready to take the plunge, make sure you know the hidden costs of owning a home.