spot_img
Monday, June 24, 2024
HomeINVESTINGHere are 3 of the top costly surprises for first-time homebuyers

Here are 3 of the top costly surprises for first-time homebuyers

-


Prospective buyers visit an open house for sale in Alexandria, Virginia.

Jonathan Ernst | Reuters

With record-high home prices and soaring mortgage interest rates, homeownership has become increasingly unaffordable — and hidden costs can surprise first-time buyers, experts say.

Indeed, everyday home expenses, including utility bills, property taxes, insurance and home maintenance, cost the average homeowner $14,155 a year, not counting the typical mortgage payment, according to a June report from Zillow and Thumbtack.

Many homebuyers just focus on the principal and interest of their mortgage payment, said certified financial planner Vince Darling at the Stonebridge Group in Forest Lake, Minnesota. “This can lead people to penny-pinch once they move into a new home.”

More from Life Changes:

Here’s a look at other stories offering a financial angle on important lifetime milestones.

Here are three of the most common surprise homeownership expenses and how to prepare for each one, according to experts.

1. Property taxes

As a first-time homebuyer, it’s easy to overlook property taxes since you’ve never paid those levies directly. Rates often vary widely by city or county, making it harder to plan for the bill.

Based on your home’s assessed value, it’s important to know which jurisdictions levy the taxes and how often reassessments happen, said Richard Auxier, senior policy associate at the Urban-Brookings Tax Policy Center. “A good person to call up would be the local representative,” he suggested.

2. Homeowners insurance

Another major expense can be homeowners insurance, with an average yearly premium of $1,428 for $250,000 in dwelling coverage, according to Bankrate.

However, it can be significantly higher in disaster-prone areas, said CFP Kevin Brady, vice president at Wealthspire Advisors in New York. These policies may not cover key weather events, so check your coverage carefully, he said.

Typically, you’ll need separate policies for floods and earthquakes. You may face a separate deductible and provisions for hurricanes and other windstorms.

With premiums on the rise, you may start shopping for a policy and gathering quotes before putting in a home purchase offer.

3. Home maintenance

The cost of home repairs and maintenance can also be a hidden expense for first-time homebuyers.

Annual maintenance costs soared to an all-time high during the second quarter of 2023, reaching $6,493, compared with —$5,984 one year prior, according to Thumbtack.

While a good home inspector can prepare prospective buyers by sharing the condition of a roof or major systems that typically need replacing at set intervals, many experts recommend extra savings for inevitable expenses.

As a first-time homebuyer, you need to make sure you have a sufficient cushion for surprises — I’d argue 5% of the home’s purchase price at least.

Nicole Sullivan

Co-founder of Prism Planning Partners

“As a first-time homebuyer, you need to make sure you have a sufficient cushion for surprises — I’d argue 5% of the home’s purchase price at least,” said Nicole Sullivan, a Libertyville, Illinois-based CFP and co-founder of Prism Planning Partners.

“Be aware that anything that comes up on the home inspection will need to be addressed and could happen sooner rather than later,” she added.



Source link

Related articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Stay Connected

0FansLike
0FollowersFollow
3,912FollowersFollow
0SubscribersSubscribe
spot_img

Latest posts