Buying a home is a dream come true for many, but it's important to remember that homeownership comes with its own set of ongoing expenses. While your mortgage payment may be the largest and most obvious cost, there are several hidden expenses that can take a bite out of your budget. Let's uncover these hidden costs so you can be prepared and avoid any financial surprises.
1. Property Taxes
Property taxes are a significant expense that homeowners must pay annually. In Austin, the average property tax rate is about 2.24% of the assessed value of the home​ (Austin Home Buyer Representation)​. This can amount to several thousand dollars per year, depending on the value of your property. It’s essential to budget for this expense and understand that property taxes can increase as property values rise. Note: If you finance your home with a mortgage, your taxes should have already been included in your PITI monthly payment AND an escrow account should have been set up and funded at closing to ensure this expense is accounted for. Pro Tip: When you become a homeowner, check to see if you qualify for any exemptions (a homestead exemption for example) to ensure you are saving the most on your taxes. IF your taxes go up an exorbitant amount one year, you can protest your taxes.
2. Homeowner's Insurance
Protecting your investment with homeowner's insurance is a must. The average annual premium in Texas is around $1,945​ (Austin Home Buyer Representation)​. Your premium can vary based on factors such as the size and location of your home, your coverage options, and your insurance provider. Don't forget to shop around and compare policies to get the best coverage at the best price.
3. Maintenance and Repairs
Homeownership means you are responsible for all maintenance and repair costs. This can include everything from routine tasks like lawn care and gutter cleaning to unexpected repairs like a leaky roof or a broken HVAC system. Experts recommend setting aside 1% to 3% of your home's value annually for maintenance and repairs. For a $300,000 home, that's $3,000 to $9,000 per year.
4. Utilities
Utilities can add up quickly. For a 1500 square foot home in Austin, typical monthly utility costs include:
Electricity: $159
Water: $40 to $60
Natural Gas: $20 to $30
Internet and Cable: $100 to $150
Trash and Recycling: $20 to $30
Phone: $50 to $100 Total monthly utilities can range from $389 to $529​ (EnergySage)​​ (Texas Real Estate Source)​​ (RentCafe)​​ (City of Austin Open Data Portal)​.
5. Homeowners Association (HOA) Fees
If your home is in a community governed by a homeowners association, you will need to pay HOA fees. These fees can range from $200 to $600 per month and cover services like landscaping, security, and maintenance of common areas. Be sure to understand what is included in your HOA fees and budget accordingly.
6. Pest Control
Regular pest control is essential to prevent infestations that can cause significant damage to your home. The cost for pest control services can range from $50 to $200 per quarter, depending on the size of your home and the type of pests being treated. You can do pest-control yourself or get on a pest control plan with a local pest expert.
7. Emergency Fund
Unexpected expenses are a part of homeownership. Having an emergency fund is crucial to cover sudden costs like major repairs or appliance replacements. Financial experts recommend having three to six months' worth of living expenses saved in an emergency fund.
8. Home Improvements
As a homeowner, you may want to make improvements to your property over time. This could include remodeling a kitchen, updating a bathroom, or adding a deck. These improvements can increase the value of your home but come with significant costs. Plan and save for these projects to avoid taking on additional debt.
Conclusion
Understanding and budgeting for these hidden expenses can help you avoid financial stress and enjoy your home to the fullest. Remember, the key to successful homeownership is being prepared for the full range of costs involved.
Looking Ahead: For those that are planning to be homeowners, check out our blog on How to Plan for Home Maintenance Expenses.
Ready to navigate the costs of homeownership with confidence? Contact Jackie today for expert advice and assistance in your home journey!
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