Mortgages
The Other Costs of Buying a New House
Buying a house is a major investment; it’s something most of us have to save for over a long period of time. And when we write those checks at the closing, it wipes us out. All those years of saving and it’s gone with the flick of a pen. But now, in its place we have keys to our very own home. We’re landowners now!
You have an empty house that now belongs to you and a bank. Suddenly you’re also hit with the realization there’s a lot more spending to come. While we often focus entirely on raising enough capital to pay for a house, we need to keep some money aside for all of the expenses that come after buying a new home.
PMI Insurance
You need to have homeowners insurance at the closing and in some cases it can be built into your monthly mortgage payments. And that’s always nice because it’s one less check you have to write. But there are a few other insurance concerns to think about. First there’s Private Mortgage Insurance (PMI).
If you put in less than 20% of the value of the house for your down payment you have PMI. Before the HPA Act of 1999, homeowners had to request cancellation of PMI. Now, Mortgage lenders must cancel PMI when the mortgage is paid down to 78% of the value, provided you are current on your loan. However, you still have the right to request cancellation at 80%. That 2% may be small but if you watch those numbers like a hawk you may be able to save a few hundred dollars.
Extra Coverage
Under the insurance category, while you may have enough homeowners insurance to satisfy legal requirements, do you have enough to satisfy your own? The fact is standard homeowners has a set coverage limit for personal property inside the house. If you have rare or valuable items that would be difficult to replace on your own, you may want to look into additional coverage.
Find out what your total property coverage is and run a few numbers on your personal items. Get a rough estimate of what it would cost to replace electronics, jewelry, securities or other valuables and figure out how much you’d be paying out of pocket in a fire or other kind of tragedy. If it’s a lot more than you can afford, additional coverage is often very reasonable, and may be very necessary.
Moving
Pretty much everything about moving is a giant pain. You have to put all of your belongings into boxes, haul them out and then put them away again somewhere else. It’s a hassle. It’s also not that cheap. Best case scenario you’ve got some friends with big vehicles, a free Saturday and the kindness to lift heavy things in exchange for beer. You also hope you have plenty of boxes and packing materials on hand. If you’ve got all that, moving is almost free save for gas and food. But if you don’t, you may have to rent a truck, hire movers and buy supplies. If you are moving a long distance or across the country shipping may be another issue.
Storage & Cleaning
If you can’t fit all the stuff you’ve acquired into your new home, you may wind up having to pay for storage as well. When you are moving out of a rental, it’s going to need a full-scale cleansing if you want your deposit back. Most people opt to do that kind of work themselves, but if your focus is on setting up the new house, then a cleaning service for the old place could be another cost.
Utilities
Congratulations on your new property, you have a structure and land with no power. Getting your utilities and non-essential services like cable and internet hooked up also costs money. The installation is definitely a fee, and in some cases you may have to pay to turn some things off. Most of us can’t function long without electricity so this is something that is usually done immediately. Plus the cable guy may not even be able to get there until somewhere between 8am and 3pm a week from Tuesday.
Decorating
Even assuming you have plenty of household furnishings accumulated from your former residence. What are the odds that everything is exactly the way you want it when you buy the house? Usually, they’re slim to none. So at the very least you’ll probably find yourself buying paint and painting supplies.
Beyond that there’s carpeting, blinds, curtains, furniture, or other amenities you lack that must be purchased. Sure, you can live on a folding chair and a milk crate coffee table for a while, but eventually you’ll want to face these costs, or resign yourself to never having visitors.
When you buy a house, make sure to leave a little extra room in your purchasing budget for all of the expenses you’ll face after you are officially a home owner. Some are essential and others are elective, but it’s your priorities and unique situation that will dictate which is which.
Platon is a writer for Guard Insure an insurance agency offering Massachusetts Home Insurance. Platon has been writing for a number of years and has worked in the insurance industry for nearly a decade.
