Have Your Guest Feel Right at Home with These Guest Room Design Concepts
7 Tips To Buying A Home During The Holidays


Photo: NORTHFOLK / Unsplash

Transitioning from a renter to a homeowner unlocks a whole new level of freedom and responsibility. Now, you can paint your living room walls that Kermit-green colour that you love so much, or adopt 15 cats — sans a landlord, there’s just so much more flexibility.

Of course, questionable paint choices and pets aren’t the only things that will change in your life as a new homeowner. Housing costs, once limited to just a rental payment and some utility bills, balloon into much bigger and possibly very consequential expenses. That’s why, when marching into the realm of homeownership, one must be equipped with the financial skills and budgeting know-how to take on the momentous responsibility of owning real estate.

“It’s important to go into homeownership fully informed of all the costs involved with buying your home, as well as maintaining those expenses in your monthly and annual budgets,” says Octavia Ramirez, founder of Paper & Coin, a Millennial-oriented financial coaching service.

If you’re upgrading from rental status, upgrade your financial smarts too. Whether you’re just exploring the possibility of buying a home, or you already own one and need a little helping hand, Ramirez offers a few pointers on how to manage your money and get your house in order.

And the total comes to… more than you thought

One of the biggest expenses of homeownership is the mortgage principal, no doubt. Tack on interest and mortgage insurance — if you have it — and you’re looking at a pretty sizable chunk of change. However, what some new buyers fail to see is the additional expenses of ownership beyond the mortgage payments.

“You have to take a lot more expenses into account as a homeowner than a renter,” explains Ramirez.

Photo: Kelly Sikkema / Unsplash

Even before you set foot in the door, homeowners will be tasked with paying for utility hookups, realtor and lawyer fees, moving costs, and potentially a home inspection. Then, there’s the upkeep — you might own an army of Scottish Folds now, but your landlord isn’t around to pay for those property taxes anymore. Home insurance, utilities, taxes, condo fees, and maintenance expenses are the owner’s responsibility.

Ramirez stresses that it’s important to be aware of these costs, and account for these expenses in your monthly and annual budgets. Some fees are charged quarterly, or once a year, like your property taxes. Knowing roughly how much they cost upfront will allow you anticipate when to pay and how much you should tuck away until that time when the payment is due.

“Same thing with certain utilities, like water bills, which only come once per quarter and might have been covered with your rent before,” explains Ramirez. “Make sure you know when to expect that, and approximately how much that will be, so that you’re prepared when the bill comes.”

Ramirez says that it will take some time living in your new space to know approximately how much everything will cost, though you should still have a cushion of savings available for added or unexpected expenses. Keep in mind that the size, location and type of property you buy will cause your expenses to vary — larger homes cost more to heat and cool, big-city living could mean higher property taxes, and living near a hurricane-prone zone might spell greater insurance fees.

A rainy-day fund for a six-month-long flood

In your rental apartment, if your hot water tank croaked it, your landlord would be responsible for repairing it at no cost, allowing you to get back to taking 40-minute long showers unscathed by technician fees.

Those days of free repairs are gone in homeownership. When those unexpected repairs hit, they hit your wallet hard, which is why building a reserve of savings is vital for tackling emergency costs. Whether you’re renting or owning, Ramirez recommends having three to six months worth of expenses banked in a savings account for emergencies. When you own a home, it’s best to add more to this fund.

Photo: cetteup / Unsplash

“As a homeowner, your expenses will likely be higher than someone renting, which means that you’ll have to bump this fund up to reflect your new budget and monthly expenses,” she explains.

Unexpected costs aren’t limited to faulty water tanks and leaky roofs either — losing a job, falling ill, or taking an unpaid leave from work constitute costs you may need to cover. When you have dependants like children or pets, covering their expenses is critical, so Ramirez recommends that large families contribute more to their emergency fund and have a stockpile of at least eight months worth of expenses to cover any financial crises.

Turn additional space into additional income

Homeownerhsip is expensive, duh. But your home doesn’t have to sit there like a big pile of bricks and mortar — if you’re struggling to make your homeowner budget work, even if you’ve only been doing it for a year or two, you can get creative with the assets that you have to create additional income.

“Do you have two cars sitting in the driveway? Make do with one, and list the other one on a car sharing or renting website like Turo,” says Ramirez. “Have an extra room in the house, or a legal basement apartment? Consider renting it out to someone, or listing your place on Airbnb, if possible. Or, sell the extra furniture and things in your home to bring in some extra cash. Find ways to turn your assets into income generators, especially during a time that money is tight.”

Photo: Patrick Perkins / Unsplash

Even picking up extra hours at work or freelancing could make a huge difference to your budget. As Ramirez explains, it’s worth trying to avoid losing your home or having to move again. In the worst case scenario, sometimes it’s better to break up and move on rather than stay together — you might have to cut your losses and sell.

“Not ideal, but better to start fresh without the day-to-day struggle of hanging on to something that may have been financially over your head in the first place,” says Ramirez.



Original Post - https://www.livabl.com/2019/11/budgeting-tips-new-homeowner-needs-know.html


The comments to this entry are closed.