There are many factors to be considered, in addition to the mortgage payments and down payment, when you decide to buy a home. And, these expenses can even continue after you have paid off your mortgage.
The first expense is in the form of property tax, which is to be paid to your local or municipal government, or you’re state or county. And, this needs to be paid for the time for which you own your home. Property taxes are based on your home value, and they can change from time to time. Before you purchase your home, find out the property tax in the area because they also vary on the basis of the region.
Another expense involved in your home is in the form of maintenance. This involves replacement of appliances and repair of hot water tank. You should keep a budget of minimum 1% of your home’s value for maintenance. Hence, if the value of your home is $200,000, it is important to keep around $2,000 for maintenance works. But, as per some sources, this percentage should be as high as 4% every year.
Another expense involved in owning a home is your mortgage interest. The duration for which you amortize the mortgage, the rate of interest and the payment frequency determine the amount of mortgage interest that you would pay. Based upon the kind of mortgage chosen by you, the rate of interest can change from time to time. A simple example is if you have a mortgage of $200,000, for a period of 30 years and the rate of interest being 5%, then you can expect to pay just below $200,000 in interest.
Another expense on your home will be your home insurance. While rental insurance covers the contents in the home, homeowners insurance also provides coverage to the physical structure of your home. There are various levels of coverage and protection, and the premiums can also vary accordingly.
Another expense on your home would be in the form of agent and legal fees. There are additional costs involved when you are buying a home. You have to pay fees to real estate agent, which can also be called as commission. And, they can be as high as 6% of the value of the home. When you are selling your home through an agent, say for $200,000, you can expect to pay as much as $12,000 to him as commission.