5 Main Costs When Buying Your First Home
You would think that once you have found a house you like and agreed on the price, all you will need is the money to cover the deposit on the house and you are all done. That’s not true. There are a number of other associated costs that come with buying a house that can completely blindside you. Here are 5 main costs when buying your first home.
This is the main cost you have to pay when you buy a home. It is also the cost most people are aware of, and plan for in advance. In most cases, the deposit you pay will be between 5% and 20%, although some people can pay deposits of over 20%. So, if the home you are buying is worth $200,000, and you have to pay a 10% deposit, you will have to come up with $20,000 upfront, and the bank will pay off the rest for you, leaving you to make monthly mortgage payments.
Once the process of purchasing your new home goes smoothly, and you are ready to put the final signatures on the contracts, be prepared to spend more. These costs are known as closing costs. Generally, this is an assortment of fees and expenses with can include title insurance fees, recording fees, processing fees, among others.
The property market has a way of not letting you know about these costs beforehand, which is why many people do not see them coming. A good way to avoid the surprise is to inquire about them well in advance so that you can prepare yourself accordingly, although they usually range from about 2% to 5% of the cost of the house.
Property Appraisal Costs
When you go to get a mortgage from your lender, they will not accept the price you have agreed to pay for the house as the property’s true value. This is why you will most likely have to involve a professional to revalue the home so that they can use an estimate they trust to advance you a loan on the house. Traditionally, these costs were part of the closing costs, but these days, they are usually paid upfront and have to be paid whether the deal succeeds or not. This cost can reach about $500.
Once you pay for the house and have the document to prove that you are the owner, you still have to keep it running. This costs money, and they will be required immediately the home becomes your own. You have to pay for gas, electricity, water, Internet connection, telephone and so forth.
When you move in a new home for the first time, you may have to buy new furniture. The budget for this can be enormous. Even though you can furnish your house a step at a time as funds become available, there are certain basic furnishings you cannot do without as you wait to get enough money. Consequently, you have to plan for basic furnishings such as beds, sofas, tables, and other basic furnishings; and these do not come cheap.
With the excitement that comes with owning a new home, most people only worry about how they will cover the initial deposit and get the mortgage to help them pay off the rest of the cost. However, your financial planning has to go beyond this. You should put aside up to about 10% of the house’s cost for additional costs that come with owning a home.
Considering that some deposits are just 5% of the house’s cost, the added costs of up to 10% of the house’s value can be quite a bad surprise for home buyers who did not expect them at all. The deal might even fall through if you can’t raise the money to cover these costs.