Your savings account has been steadily growing over the last few months – or even years. Your budget has been meticulously planned, and you have accumulated savings wherever possible to become a homeowner.
Once you’ve achieved that goal, you may not feel the need to budget or save anymore. Try not to get comfortable too soon.
As a homeowner, here are 8 expenses you should plan for regularly
Budget for the following homeowner expenses.
When you move into your new home, you may find your utilities are higher than if you were renting – especially if the area is significantly bigger.
Previously, utility costs may have been rolled into your rent payment. Prepare for a separate bill.
Research service providers’ rates in advance to plan for these costs. The previous owner may be able to tell you about average costs, though your usage may differ.
A homeowner’s insurance policy covers your house and belongings in addition to liability coverage in case of an accident on your property. A homeowner’s insurance policy will differ depending on its coverage and cost.
Insuring older homes, houses with pools, and houses in more risky areas – like those on the water – can be more expensive. If you live in a flood-prone area, you may also have to purchase flood insurance.
Escrow accounts are often used to hold homeowners insurance, similar to taxes. If not, you should divide your annual insurance bill by 12 and put that amount aside each month.
Homeowners are taxed to help fund schools, road improvements, and other services. Millage rates and assessed values determine your taxes.
Public records reveal how much previous owners were taxed, so you can check how much they paid. Remember, however, that taxes are subject to fluctuations based on changes in home values and millage rates from year to year.
Tax payments are included in a homeowner’s mortgage payment by many lenders. Escrow accounts hold your monthly payment for taxes until the bill is due, usually once a year. By using these accounts, you can avoid budgeting for taxes every month.
If you don’t have escrow payments for taxes in your mortgage (or do not have a mortgage), you’ll need to open a risk-free savings account where you deposit one-twelfth of your annual tax bill every month.
4. Maintenance and Repair Fund
Personal finance experts suggest homeowners should save about 1% to 2% of their home’s value each year for maintenance and repairs, even though you may not have to save as aggressively as you did when saving for a down payment.
With a $300,000 home, for example, you can expect to save about $3,000 to $6,000 a year for future expenses – which is about $250 to $500 a month.
Savings or money market accounts with high-interest rates are good options for storing these funds. These savings might not need to be accessed every year, but they’ll be useful when you need to fix something.
If you prefer, you can purchase a home warranty that covers repairs to certain systems and appliances, such as your air conditioner and fridge. Compare the warranty costs (plus any related fees) to the amount you could save on your own for future repairs.
5. Security System
Once you move into your own home, you might consider installing a security system. Houses are major assets that you’ll want to protect – as well as your family and possessions.
If you are planning to install a security system, budget for the initial costs of purchasing and installing it, as well as the monthly monitoring fees.
A new house will require you to change all the locks at the very least when you move in.
6. Homeowners Association (HOA) or Condo Fees
Plan for the cost of homeowners association or condo fees if you live in a condo or neighborhood with one. It covers expenses associated with shared amenities, shared space, neighborhood aesthetics, and security.
Depending on the fees, your monthly housing expenses may increase by a couple of hundred dollars.
Set up a sinking fund and save every month if your fees are paid once a year.
7. Pest Control
Once upon a time, ant infestations could be reported to your rental office. This lovely job has now become yours.
A home improvement store may offer pesticides, barrier treatments, or traps for do-it-yourselfers. A rodent family in your attic, however, may warrant calling in the professionals. There are more effective extermination solutions available from pest control companies than those you can buy from the store.
Check out several quotes to get the most competitive price. For those who want to have their homes treated regularly, many offer preventative maintenance contracts.
8. Lawn Care
You should decide if you’d like to take care of your lawn yourself or hire someone to do so. Shop around for the best price before hiring a lawn care service or find someone on TaskRabbit for cheap.
Plan for the price of equipment and supplies if you opt to do it yourself. Certain equipment may require ongoing costs, such as gas for a mower.
In addition to the costs listed above, you’ll also have to spend time and energy.
In spite of the aesthetics, your city – or your homeowner’s association – likely has rules and regulations regarding lawn maintenance. Leaving your grass to grow too high could result in a fine.
New Homeowner Financial Responsibilities
To make sure you’re comfortable with all the expenses you will incur as a new homeowner, gather quotes and estimates and make a mock budget.
Moving costs should also not be overlooked. The costs of paint, carpet cleaning and furniture are all considerable.
Expenses don’t have to be a black cloud over your celebration. When you purchase a home, it’s a joyful occasion, but be prepared to meet any storm that comes your way. You still have a lot to save after you throw the housewarming party. You can always find a side job to help make extra income for emergencies.