Here are three expensive financial pitfalls for first-time homebuyers, along with advice on how to avoid them.

Homeownership has grown more and more out of reach due to record-high housing costs and rising mortgage interest rates.
Even worse, the average homeowner spends $14,155 a year on regular house expenses, not including the median mortgage payment.

Homeownership has become more and more out of reach due to record-high property prices and rising mortgage interest rates, and first-time buyers may be surprised by hidden expenditures, according to experts.

Regular house expenses, such as energy costs, property taxes, insurance, and home maintenance, according to a June survey, actually cost the average homeowner $14,155 per year, not including the typical mortgage payment.

According to Vince Darling, a certified financial advisor with the Stonebridge Group in Forest Lake, Minnesota, many homeowners only pay attention to the principal and interest of their mortgage payment. This may cause people to pinch pennies after moving into a new house.

Here are three of the most typical unforeseen house expenses and advice on how to plan for each one, per experts.

1. Real estate taxes
Given that you have never directly paid property taxes, it is simple for a first-time house buyer to overlook them. It is more difficult to prepare for the bill because rates frequently vary greatly by city or county.

In the words of Richard Auxier, senior policy associate at the Urban-Brookings Tax Policy Center, it’s crucial to comprehend which jurisdictions are in charge of collecting taxes based on the assessed value of your home and how frequently reassessments occur. “The local representative would be a good person to call,”

2. Residence insurance
Another large expense is homeowner’s insurance, which, according to Bankrate, has an average yearly price of $1,428 for a $250,000 housing policy.

According to Vice President of Wealthspire Advisors in New York and CFP Kevin Brady, it can be much greater in disaster-prone places. He urged people to carefully review their coverage because some significant weather events might not be covered by their insurance.

Different insurance is frequently required for floods and earthquakes. You may be subject to a different deductible and windstorm-specific regulations.

Before submitting a house buying offer, you might start looking for a policy and getting quotations due to rising premiums.

3. Upkeep of the home
The expense of home maintenance and repairs might occasionally come as a surprise price for first-time homebuyers.

According to Thumbtack, annual maintenance expenditures increased to an all-time high during the second quarter of 2023, reaching $6,493, up from —$5,984 the year before.

While a competent house inspector can inform potential purchasers about the state of main systems that frequently require replacement at predetermined intervals, such as the condition of the roof, they can advise additional savings for unforeseen costs.

“As a first-time homeowner, you need to make ensure you have an adequate cushion for surprises — I’d argue 5% of the home’s purchase price at least,” advised Nicole Sullivan, a CFP and co-founder of Prism Planning Partners based in Libertyville, Illinois.

Be mindful that anything found during the house inspection will require attention and may happen sooner rather than later.

Leave a Reply

Your email address will not be published. Required fields are marked *