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What Is the Real Cost of Buying a Home?

By - January 16, 2013

There are two numbers that probably catch your attention when you're shopping for a home. One is the price of a given house, and the other is the monthly mortgage payment required. But when you're buying a home you are actually buying into a whole set of expenses. These costs include property taxes, insurance, utilities and more. To fairly compare homes you should look at and add up all of the expenses involved. The costs in each category can be very different from one house to the next.

For example, a home inside a city limits might have property taxes that are $1,800 higher than a similar house just outside the city. That's a difference of $150 per month. At today's low interest rates you could pay $30,000 more for the suburban home and still have a lower total monthly cost, if all other expenses were equal.

Of course, all other costs are never going to be the same, so do the math. It isn't complicated, and when you cannot get a figure, like the monthly heating bill, just estimate as closely as you can. Add everything up for a year and divide by twelve to find the real monthly cost of owning a particular home. Then keep that number handy when looking at other homes.

What should you include in your figures? Essentially you need to add to the calculation any expense that will result from owning the house. This will be different for different homes, but can include some or all of the following...

- Mortgage payment

- Property taxes

- Homeowner's insurance

- Association dues

- Heating costs

- Electricity

- Water and sewer

- Special assessments

- Routine maintenance

- Commuting costs

The last two are a bit tricky to calculate, but are worth including. If the home has no special maintenance needs, you might just ignore that category, since all homes will need basic care like lawn work and (eventually) fresh paint. But if one home you are considering has a pool that will need regular cleaning and upkeep, add those costs. Add any other extra expenses to your tallies as necessary (a fish pond will require cleaning, fish food and algae treatments, for example).

As for commuting expenses, you might just skip that figure for any homes within five miles of your current employment, since they will all impose similar costs. On the other hand, a home that is forty miles from work, if you commute five days per week, can add over $500 to your monthly costs. In fact, an extra 35 miles of commuting (each way) can cost as much per month as the extra mortgage payment on a closer home that is priced $80,000 higher. It is something worth considering. All the real costs are worth looking at, so add them up to compare your options fairly before buying a home.

Other Considerations

Now, for those readers who are really watching the numbers, there are some other expenses you might want to consider. The cost of buying a home can be looked as the total paid, and/or as the expected monthly sum of all expenses. But there are also some special expenses that might be due soon after you buy.

For example, if two houses are roughly equal in other ways, but one has a roof that is only two years old and the other has a roof that is more than twenty years old, that's something to consider. The second one will likely need replacing within a few years of purchase. A new set of shingles can cost as much as $10,000 or more depending on the home.

Look for other costs that are likely to come soon. Are the appliances old and dying? Are there large trees in the yard that are diseased and will need to be removed? How long before the home will need to be painted? Don't get too worried about all of these possible problems. Every house requires work. And of course you also have to think about the layout of a home, the location, the size, and how you feel in general when you imagine living in the house. But also consider the costs along with all the other factors, so you can buy the home that makes the most financial sense for you.

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Houses Under Fifty Thousand | Real Cost of Buying a Home