The purchase price of the home comes with a number of fees. This includes but is not limited to title transfer fees, legal fees, loan origination fees, realtor commissions, and property appraisals. The closing costs hint at the ongoing costs of owning the home such as pro-rated property taxes and insurance. The ongoing costs of owning a home are what will impact your budget the most.
Your Florida Mortgage
Your mortgage is often the largest monthly bill you pay aside from your income taxes and payroll taxes. It is common for people to pay up to 40 percent of their take-home pay on the house payment. Many people choose to take out a 30 year mortgage to minimize their monthly costs because of the extended amortization timescale. However, you should consider a 15 year mortgage if you can, because you’ll eliminate the house payment years later. Don’t take out a 30 year mortgage on the promise you’ll pay extra on the house principal because less than ten percent do so enough to pay it off appreciably faster. Note that a larger down payment on the home results in a lower monthly payment and often a lower interest rate. And it may eliminate mortgage insurance premiums.
Florida charges property taxes on every home. Homes for sale in Coconut Grove for example, will be assessed at the purchase price for the next tax year. You’ll pay around one percent of the property’s value annually in property taxes. When you close on the home, the property seller should prorate the property tax amount for the year to date. For example, if your new home would have a 5,000 property tax bill and you buy it half way through the year, you should be given 2,500 dollars at closing to offset the 5,000 property tax bill you’ll owe at the end of the calendar year.
Florida has some of the highest home owner’s insurance rates in the country. This is partially due to the periodic hurricanes. The accompanying flooding and wind damage have an impact, too. You’ll have to maintain a certain level of homeowner’s insurance to remain in compliance with the lender’s terms. Depending on where the home is located, you may have to have federal flood insurance, too.
A general rule of thumb is to set aside one percent of the home’s value per year to pay for various repairs. If you have a 500,000 dollar house, set aside 5,000 dollars per year toward home repairs. This doesn’t mean you’ll pay literally 400-500 dollars a month in home repairs. Instead, the larger, more expensive house comes with a more expensive roof replacement when it begins to sag.
Appliances break. Pests seek to invade your home. Set aside several thousand dollars a year based on the size and cost of your home to cover broken air conditioners and broken windows. Then you won’t go into debt to repair your home, and you won’t let problems get worse because you don’t have money to fix it when it is a minor issue. For example, a plumbing leak causes mold and a high water bill at start. Let it run for months, and you run the risk of costly flooring and structural damage to the home.