The real costs of home ownership
Because of the high prices of homes in the United States, people often focus on only the buying price when considering the costs of owning a house, and neglect many other aspects of home ownership. A house is not your regular item that you buy and store or use for a limited amount of time. Houses come in a package with upkeep costs and taxes, and it’s wise to take these into account when analyzing your finances.
The average cost of a house is estimated to be around $200.000 in 2013. As such, it’s no wonder people are distracted about such a significant amount and overlook other aspects. Owning a house can be exceedingly expensive. Just for the down-payment on the house, which you have to come up with, you’ll be spending an average of 20-25% of the buying price. That means that the down-payment for a $300.000 house can range from $60.000 to $75.000. Thus, you need to be prepared to put down that kind of money if you’re planning on buying.
Let’s take a look at what owning a house can cost you on a monthly or yearly basis.
Most people that decide to buy houses do so by applying for loans. There are two distinct types of mortgages or loans.
The first type implies fixed rates. The advantage of this type of mortgage lies in the fact that you know ahead of time what you’ll be paying monthly. The disadvantage is that while your debt decreases over time, the monthly rate you have to pay remains the same.
The second type of loan has an adjustable rate. These rates are often unpredictable, and even though the initial monthly rates might appear to be lower than with fixed rate mortgages, rest assured, you won’t be paying less in the long-run.
When deciding what you can afford, make sure you inform yourself about just how much interest you’ll be paying for your house. The long-time costs of a mortgage can be astonishingly high, so plan carefully. You can also ask brokers to give you figures in dollars instead of percentages, as it will be easier for you to perceive just how much you’re pulling out of your pocket.
The shorter period of time you need to reimburse the loan, the better. If you can afford it, go for a short-term loan. If you’re wise and have the means, you can invest spare money into paying off parts of the loan ahead of time. Doing so will greatly reduce the amounts you have to pay on interest.
Tax on property
How much tax you’re paying for your house depends a lot on the state you live in. You might be surprised to find out that for most states, taxes on a house can amount up to tens of thousands of dollars annually. You can do some research on the issue by reading up on the data collected by the Tax Foundation. There are cases when this amount is included in your monthly mortgage payment without you being aware, but it can be even more surprising when it’s not.
Of course, a great part of property taxes can be deducted from your federal income taxes. Still, don’t take property tax lightly!...