Hidden Costs of Owning a House

Personally, I think home ownership is great.  But, it’s not for everybody, and I’m not here to make judgments on that.


One thing I have seen over the years is that many first time home buyers don’t realize the full costs of owning a house on Long Island.  They initially look at the price of the house and do some math/division and figure that it’s no problem to pay for that.  They quickly learn that there are many other costs they need to consider.


Of course on top of the principal, there is interest.  Most people get this.  Then, they learn that there are other monthly costs such as Private Mortgage Insurance (PMI) if they put less than 20% down payment.  There also need to consider taxes and Home Owner’s insurance.  And, then for some homes, there may be Home Owner Association fees or Common Charges (especially if you live in a condo, town house or Co-op).


Then, they quickly learn that there are closing costs (thankfully these are just a one time expense).  So, there are costs for inspections, attorney and bank fees.  And, you often have to contribute to the taxes that will be paid and put into escrow.  Here in NY state, there is also a mortgage tax, and this can be pretty high.  I believe it’s around 1.1% of the cost of the mortgage.


Once you get past that, you need to contend with “move in” costs which would include moving, and one time deposits for various utilities (e.g. cable, heat, phone, etc.).  And, many new homeowners also need to (or want to fix up the place before they move in (e.g. sanding the floors, replacing the carpets, painting, adding hardwood, and often many other items).  Most new home buyers quickly learn these costs are more expensive than they expected and more than they have in the budget, so they need to make some challenging choices and prioritize.  The good news is that there is plenty of time to space these costs out over time.


Another big piece that people overlook is that there are ongoing maintenance costs.  Things break.  Things get worn down.  Accidents happen.  Sometimes these issues happen at inconvenient times.  Replacing your roof can be expensive.  Appliances often wear out (and sometimes, when they break they can have a domino effect and cause additional damage – think about what happens when your water heater breaks and you have water all over the floors.  So, plan ahead as you will have ongoing costs.  Hopefully, they don’t happen right away, but sometimes unexpected things happen, especially if there is a big storm.


So, when you are deciding whether or not to buy a house (or how big or expensive a house you can afford), remember all of these added costs and factor them into your budget.  You don’t want to house poor…or worse…and find yourself in a bad situation where you can’t afford everything.


Those are my thoughts for the day.