Many home owners don't think beyond the mortgage when it comes to purchasing property, forgetting about all the other expenses associated with maintaining a home that can really add up.
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Thirty-eight percent of home owners tend to go over their household budget for home-related expenses, according to a 2014 survey by Houzz, a remodeling and design website. That's why home owners would be wise to create an emergency fund equal to three months' worth of living expenses to prepare for the cost of home ownership, says Holly Perez, consumer financial expert for Mint, a money management tool.
Here are a few of the most overlooked costs of home ownership, according to Mashable:
- Homeowners insurance: The cost varies, but in general, home owners pay around $35 a month for every $100,000 of home value. Don't forget, though, that homeowners insurance typically covers structures and possessions — not the cost to fix the item that caused the damage.
- Natural disasters: Many homeowners insurance policies cover basic natural disasters, such as hail storms and fires, but they do not usually cover floods and earthquakes. Often, separate coverage must be purchased for those types of events.
- Insurance deductible: Home owners will likely still have to pay a deductible for any damages before insurance kicks in. The deductible is the amount of money a policyholder must pay before the insurance company will cover the remainder of the expenses. That deductible could amount to $1,000 or more of out-of-pocket expenses.
- Preventative maintenance: Home owners should budget for maintenance of appliances and other systems in the house. Air conditioning units, refrigerators, and washing machines, for example, often can benefit from preventative maintenance. Homeowners insurance does not cover the cost of replacing broken appliances or faulty plumbing, so ongoing repairs and maintenance is important in preventing potentially higher expenses later on.
- Homeowners association fees and property taxes: When comparing homes to purchase, buyers often look at the list price but fail to consider the property taxes and homeowners association costs — which could be a couple hundred dollars a month. Inquire about the association's dues over the past 10 years to determine how often they rise and what they cover. Also, be aware that renovations to a home, while increasing its value, can also increase the property taxes.
- Waste collection: Home owners also should factor in the charges for garbage and recycling services. Typically, these costs average around $150 to $400, according to HomeAdvisor.
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