Becoming a homeowner is a major milestone. There’s a thrill in owning your own place, and you’ve got a new, large investment to maintain. Successful homebuyers are those who can perfectly balance that new freedom and responsibility.
There are several upcoming firsts for recent homebuyers. Check out these common homeowner situations, and you’ll be prepared for a possible setback.
1. Something major breaks
As a renter, if the refrigerator breaks, the landlord repairs it. In contrast, when something like an appliance or major system breaks in your home, you’ll be responsible to fix it.
If you’re counting on homeowner’s insurance or a home warranty to cover you, check your policies carefully. Most home warranties end at the walls of your house, and insurance won’t cover damage outside of a disaster. If your home needs significant work, you’ll probably be covering the costs yourself.
Consider practicing self-insurance. Start a home repair and renovation fund, and build major expenses into your monthly budget. These expenses become manageable when spread out over the course of several months. Expect to spend 1-4% of the value of your home in repairs and maintenance annually.
2. Costs increase
When considering a budget in your new location, housing costs aren’t the only thing likely to increase. If you’re moving from a smaller apartment into a larger home, utility costs will rise. If you’re moving into an older house, appliances won’t run as efficiently.
Additionally, transportation costs may rise if you’ve moved further away from work. A larger kitchen might encourage more cooking and entertaining, increasing the grocery budget. Lawn maintenance costs may appear on your budget for the first time.
During your first month as a homeowner, document your new living expenses so you can budget for them properly. If, after a month, you see that your expenses are too high, you’ll have an idea about where you can make cuts.
3. Tax bills come due
Property taxes can wreak havoc on your budget. While many mortgage companies include these costs in your regular mortgage payment, other homeowners are responsible to pay them at tax time. If that’s the case for you, it’s important to determine what your tax bill might look like.
The U.S. average property tax bill is under $3,000, or $250 per month. Here also, setting the expense aside monthly instead of paying it in one shot makes it manageable.
4. Maintenance requirements increase
There are dozens of things around the house, such as smoke alarms and toilet bowl seats, that decay with time. Some of these objects can damage your house if they don’t work properly.
Make a list of chores that need to be done monthly, weekly or annually. Keep a spreadsheet so you know the last time maintenance was performed on major items in your home. As always, it’s a good idea to fix little problems before they turn into big ones.