So, you’ve decided to buy your very own home. Now what? Knowing what to expect during this transition from renting to homeownership can help you avoid some of the most common pitfalls of being a first-time homeowner. Homeownership is very different from renting a property. Here’s what you should know as you make the move from renter to property owner.
What to Expect When Moving from an Apartment to a New Home
Owning a home is a great accomplishment that comes with a lot of benefits. Some of these benefits include the freedom to make your home completely yours (with potential HOA guidelines) and the ability to build equity as you pay off your mortgage. However, homeownership comes with a lot more responsibility.
When you move into your own home, you’re now responsible for your property. Even if you pay a homeowners association (HOA) fee to cover some of your grounds maintenance, you’re still accountable for the upkeep of your new home.
If you’re accustomed to rental practices, homeownership can feel like a monumental transition. You no longer have the ability to pick up the phone and call your landlord when a pipe bursts or your shower won’t turn on. You must handle all issues or problems that come your way. In addition to handling any maintenance issues, there are some unexpected expenses that you should prepare for to avoid financial stress.
Here are some expenses you should expect when moving from renting an apartment to owning a new home.
Property taxes are usually calculated on an annual basis by applying a specific tax rate to the value of your property. They are then collected by the governing authority of jurisdiction in your community. Depending on your state of residence, property taxes can be one of your highest expenses when owning a home. The good news is that property taxes are normally tax deductible.
Private Mortgage Insurance (PMI)
If you were unable to put 20% down on the purchase of your home, your lender may require you to purchase private mortgage insurance (PMI). This insurance helps protect the lender in the case you default on your mortgage payments. Your PMI payment amounts can vary by situation and are contingent on your loan amount.
Commonly referred to as the “hazard insurance” of your mortgage documentation, homeowners insurance is available to protect your lender in the case something happens to your property. If you plan to have a mortgage, homeowners insurance is a requirement of a lender in order to safeguard their investment. The cost of homeowners insurance can vary depending on your insurer and situation.
Be sure to shop around and compare rates to find the best policy for your needs. Every little bit you can save on your housing costs will help you feel more financially secure as a homeowner.
It’s recommended to use the 1% rule when estimating your maintenance costs. This means that you will set aside at least 1% of the sale price of your home to allot for unexpected maintenance expenses. Since you’re now responsible for the upkeep of your home, you may need to purchase a lawnmower, set of tools, gardening supplies, and anything else you can think of to keep your home in tip-top shape.
Of course, you can’t plan for every maintenance issue, so anticipate the unexpected. Having some cash set aside for home repairs will put your mind at ease when problems do arise.
Increase to Utility Bills
As a renter, you’re accustomed to paying monthly utilities. However, when you purchase a home you need to budget for the increase to your utility costs. With more square footage comes higher utility bills.
Upon taking ownership of your home, it’s important that you research each of the various utilities required, and assure you transfer all the accounts into your name. Ignorance of a specific bill, and subsequent neglect in paying it, will end up costing you in penalties. This is something you can avoid by spending a little extra time assuring you know who you need to pay and when.
Cable, Internet, and Phone Services
Your cable provider may be able to move your service to your new residence. However, they may charge an extra installation fee for the new location. Be sure to check with your service provider before moving to see what the additional costs will be. Sometimes cable providers are willing to negotiate service or installation costs in order to keep your loyalty.
Some providers aren’t able to offer their services to every location. Double checking before you move will help ensure you have cable and internet shortly after your transition.
If you purchased a home in a community with a homeowners association, most likely you’ll have to pay an HOA fee. These fees cover the maintenance of the common community areas. Your HOA fees could vary depending on where you live and the upkeep involved.
If you live in a typical single-family home, you can expect to spend between $200 – $300 a month. On the other hand, if you own a fancy high-rise condo with 24-hour concierge services, you may pay upward of $4,000 a month in HOA fees.
Furniture and Appliances
If you’re moving to a larger property, you may not have furniture to furnish your entire home. Depending on the condition and size of your home you may need to purchase blinds, carpet, appliances, lighting, furniture, and anything you can think of to make your house a home. Furnishing your home allows you to add your own personality and style.
Be careful, because furnishing your new residence can be expensive. You may want to focus on one area or room of your home, before moving onto the others. This will help you spread out the cost and give you some time to live in your home and identify what you want most.
The Bottom Line
If you have already purchased a home, be sure to budget for these extra expenses. Even though you can’t account for every expense you’ll experience, setting aside an emergency house fund will help you avoid the future financial stress of trying to find extra money when you’re in a pinch. The better prepared you are, the better you’ll be able to manage the unexpected.
What are some of the unexpected expenses you encountered when you purchased your first home? We want to hear from you. Please leave your comments below.
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