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Full Cost of Home Ownership
Before contracting to buy real estate, it's important to investigate the full cost of ownership of the potential property. Estimate all costs associated with living in a particular location so there are no surprises down the road that could jeopardize personal solvency.
There may be significant hidden costs of owning a home, and such expenses should be determined before an offer is made on a house. A particular home may have high water and sewer rates for instance. A home may be located near the ocean and require flood insurance, or the building itself may need more frequent painting due to the corrosive environment. When all the expenses have been forecasted, one can calculate mortgage and debt ratios, and then deduct all of these additional expenses from wages and see what is left as disposable income.
The following is a list of potential expenses that may be incurred for a property (add to Mortgage including interest, Property Taxes, Property Insurance, and Condo Fee if applicable):
Housing Expenses
- Water
- Sewer
- Heat
- Hot Water
- Air Conditioning
- Fuel Types
- natural gas
- oil
- electricity
- propane - Other Utilities
- telephone
- long distance
- cell phone
- cable tv
- communications taxes
- movie or music subscriptions - Flood Insurance if Required
- Mortgage Insurance if Required
- Personal Property Replacement Cost Insurance
- Housing Association Fee
- Lake Access Fee
- Condo Association Health Club Fee
- Condo Association Potential Special Assessments
- Home Maintenance
- Home Repairs
- Emergency Repairs
- Snow Removal
- Lawn Mowing and Landscaping
- Local Car Insurance Rates
- Commuter Gas & Tolls
- Mortgage, Future Variable Interest Rate Change
- High Inflation
When planning to buy a home, it's a good idea to complete some worksheets by yourself to ensure you will be able to afford the home and to speed up the mortgage process (examples are listed on the Buyer Tools page under Pre-Mortgage Documents).
