Purchasing a home is an expensive undertaking. By the time you’ve forked over the down payment, legal fees, and moving costs, you will be financially and emotionally drained. Before deciding to buy a home, you must think beyond the purchase price because those costs, while substantial, are a one-time thing.
Maintaining a home is costly and every homeowner needs to understand what they’re getting into before their mortgage is approved.
Property Costs
In the GTA, each homeowner must pay property taxes every year. The cost is devised by multiplying a property’s assessed value by the tax rate. There is flexibility with respect to the payment schedule, meaning homeowners can pay monthly, annually or make six equal payments a year.
Exterior Costs
If you own a house, you will have monthly costs to care for the exterior of your property. Some of these are discretionary whereas others are required for the health of the house. These costs include:
- Cleaning the gutters
- Lawn care and gardening
- Roof Care
- Snow removal for driveway
- Window washing
Remember, some of these tasks can be performed by the homeowner, assuming they know what they’re doing and have the time. Doing a lackluster job could cost you more money in the future as you’ll have to pay someone to undo your work and then complete the job.
The Guts of the Home
There’s a lot of essential equipment and technologies that need regular upkeep in your house. Furnaces and hot water heaters need regular inspection and maintenance. You will also have to pay for general repairs and some opt to pay for housekeeping.
A good rule is that the annual maintenance of a home will cost one percent of the purchase price. If your home costs $500,000, then you should budget $5000 for ongoing maintenance. Anything left over can just roll into the budget for the following year. Some prefer to calculate maintenance costs per square foot. The rule here is to budget $1 per square foot. A 1,000 square foot home would conceivably cost $1,000 in maintenance.
For maintenance, repairs, and upgrades cash flow is essential. A home equity loan is a proven way to leverage your equity into maintaining or increasing the value of your property. If cash flow isn’t an issue, then be sure to properly budget.
