There’s more to homeownership than just the mortgage

The thought of moving from renting to buying can be almost exhilarating. Finally, you’ll be achieving the dream of homeownership. Whether you are in your 20s, 30s or beyond, you may find you can almost taste the feeling of triumph. Whether it’s been a lifelong dream, a necessity due to increased family size or the result of an unexpected windfall, moving toward homeownership makes you feel you’ve arrived — as an adult, as an independent financial being.

However powerful the emotional high, a thorough analysis of how a home purchase will change your financial picture is a must. Heading into this new life era starry-eyed is not recommended.

Understanding the reality of how homeownership will change your financial picture is a must. The mortgage payment represents just a portion of your monthly costs as a homeowner. Following are a few factors to keep in mind as you move into this chapter of your life.

The mortgage is just one part of your monthly expenses as a new homeowner.
Insurance and utility costs are two sizable expenses for a new homeowner. 

Property insurance is a cost first-timers tend to overlook when assessing their readiness to buy. Rates are based not on your home’s value but on how much it will cost to reconstruct the house. According to the National Association of Insurance Commissioners, the average rate in California for a $500,000 policy, as of 2017, was $1,701. What’s more, according to industry experts, insurance can tend to increase over time. Not only do you have to factor in the cost at time of purchase, you have to allow for the likelihood that it will rise as years go by.

Property tax is another oft-forgotten reality. In Northern California, annual 2018 property tax rates run from .56 percent in San Mateo County to .71 percent in Contra Costa County, according to Tax-Rates.Org. This adds up to an average annual cost of $4,424 in San Mateo County and $3,883 in Contra Costa County. Santa Clara County homeowners pay an average of $4,694 (.67 percent). Alameda County homeowners seem to have an average yearly cost of $3,993, reflecting a rate of .67 percent. This means — on average — a monthly expense of between $300 and $400.

Higher utility costs

If you’ve been accustomed to living in an apartment, even a large one, you’re likely to discover heating and cooling a home takes utility expenses to a whole new level. Moreover, depending on the number of bathrooms and how often you use the washer and dishwasher, the water bill is often higher than what you might have paid in a rental unit.



While it may sound like a dream come true to have a yard or garden of your own, other types of maintenance may not inspire warm fuzzies. While you were renting, the landlord was responsible for all HVAC, plumbing, structural and other issues that might arise. When you are the owner, it’s all up to you. And while you might be a talented DIYer — or at least think you are — undoubtedly there will be some issues that will have to be turned over to a professional. Water heater and other serious plumbing issues are too critical to leave to chance and can end up costing a pretty penny — a penny you will have to save to ensure a safe and pleasant experience in your new home.

HOA dues

In a planned community, whether you are buying a stand-alone home or townhome, the homeowners association is a reality. Dues can range from just over $100 to $500 or more per month, depending on amenities offered. Needless to say, before you buy, you need to understand what these costs are and what they cover.

The prospect of becoming a homeowner can put you on a true emotional high. Coming down to earth to make a thorough assessment of all the costs of owning a home will stand you in good stead.

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