The Hidden Costs of Owning a Home: What You Need to Know
As a homebuyer, you’re prepared to pay certain costs to get the keys to your new home. Ideally, you got a home inspection and have a general idea of how much work the property needs. Even then, there are hidden costs of owning a home that buyers don’t usually anticipate.
As a new homeowner, what should you be prepared to pay for, especially in that first year? Standard expenses for homeowners include things like home insurance, routine maintenance, HOA fees, and property taxes. Include these items in your budget, and be prepared for unexpected projects or repairs.
If there’s a problem with your new house, you won’t have a landlord to turn to. You probably have a general idea about what kind of work needs to be done on your new property, but home warranties can protect you from some of those surprise repairs. Home warranties cover major systems in your house, like the HVAC, electric, and plumbing systems. Home warranties typically cover damage or problems with major household items. Getting a home warranty is a great way to protect your new investment during that first year of homeownership.
Standard expenses for homeowners
When you become a homeowner, it’s crucial to be prepared for the expenses that will arise, particularly in the first year.
Home insurance
Most banks and mortgage companies require home insurance before granting a loan. Your insurance premium is often included in your mortgage payment. It’s essential to understand what your insurance policy covers. Remember that if you live in a floodplain or an area prone to wildfires, your premium may be higher. Additionally, insurance premiums can increase annually. Consider shopping around every few years to ensure you get the best coverage at the most competitive price.
Property taxes
Property taxes are typically included in your mortgage payments. Your city, township, or county determines them. While you can’t control property tax increases, you can file a dispute or appeal if you believe there has been a significant and unjustified increase. The process for filing an appeal varies, so consult with a real estate agent or lawyer to determine if it’s worth pursuing.
HOA fees
If you live in a neighborhood with a homeowners association (HOA), you’ll be responsible for paying HOA fees. These monthly payments help maintain amenities, common areas, and properties within the community. HOA fees ensure shared facilities like golf courses, pools, and community clubhouses remain well-maintained. It’s important to familiarize yourself with the guidelines and rules set by the HOA to avoid any unexpected costs, such as repainting your house to comply with the guidelines.
Repairs and routine maintenance
Regardless of whether your new home needs extensive repairs or not, routine maintenance is an ongoing expense. Your home inspection report can provide insights into potential issues and necessary repairs. If you purchased a fixer-upper, you should be prepared for significant expenses such as roof repairs or replacing major appliances. Regular maintenance tasks like lawn care or scheduling professional check-ups for your air conditioner are also necessary. Investing time and money in routine maintenance now can save you from more substantial repairs and expenses in the future, and having a home warranty will save you even more.
Unexpected household item costs covered by a home warranty
Homebuyers can purchase a home warranty, which covers certain unexpected repairs. On average, a warranty costs between $300 to $600 for one year of coverage.
While the inspection report gives you a picture of the property’s current state, it can’t tell the future. Home warranties are a great way to save money in the long run. A couple extra hundred dollars will give you plenty of reassurance if any of these ten household items break down:
Dishwasher: Warranties cover all components and parts.
Clothes washer: Warranties cover all components and parts.
Clothes Dryer: Warranties cover all components and parts.
Built-in microwave: Warranties cover all components and parts. This does not include free-standing microwaves that you bring into the house yourself. The unit must be included in the kitchen at the time of purchase.
Oven and stove top range: All components and parts are covered.
Refrigerator: All components and parts are covered, including the attached freezer.
Water heater: Warranties cover components and parts for gas models, electric models, tankless units, and circulating pumps.
Heating and air conditioning system: Warranties cover the parts and components of ducted units, electric units, central units, split and packaged units, forced air, geothermal, wall-mounted units, mini-splits, heat pumps, floor furnaces, hot water furnaces, electric baseboard, ducts from the unit to the point of attachment, and replacement parts the system needs to meet government guidelines.
Electrical system: This includes wiring from the electrical panel to any other covered item, such as light fixtures, electrical panels, DC wiring, light switches, and electrical outlets.
Plumbing System: Certain parts of the plumbing system are covered. Toilets, breaks and leaks, faucets, toilet wax ring seals, drain stoppages, sewage ejector pumps, and pressure regulators are considered covered under the warranty. If there’s an issue with the water line connecting your house to the city’s system, you may need additional coverage to avoid getting stuck with the bill.
Home warranties cover items that break due to normal wear and tear. If you install something improperly and it breaks, you’ll be responsible for repair costs. Cosmetic damages often aren’t covered. If your dishwasher door is scuffed up, but the dishwasher still works, the home warranty probably won’t cover a replacement door.
Are home warranties worth the money?
Home warranties can provide additional financial protection to homeowners from unexpected costs. They typically cover major systems in your house, such as HVAC, electric, and plumbing systems, as well as other household items. Here are some key points to consider:
Coverage for major systems and appliances
Home warranties protect you from unexpected repair costs for major systems and appliances in your home. If any of these items break down, your warranty will cover the repair or replacement expenses. Covered items often include dishwashers, clothes washers and dryers, built-in microwaves, ovens and stove tops, refrigerators, water heaters, heating and air conditioning systems, electrical systems, and plumbing systems.
Protection from normal wear and tear
Home warranties typically cover items that break due to normal wear and tear. However, it’s important to note that damages resulting from improper installation or cosmetic issues may not be covered.
Peace of mind during the first year
Investing in a home warranty can provide peace of mind, especially during the first year of homeownership. As a new homeowner, you may not be familiar with the condition of the various systems in your house. A home warranty acts as a safety net, protecting you from unexpected repair expenses during this crucial period.
Potential cost savings
While home warranties require an upfront investment, they can potentially save you money in the long run. Instead of having to pay for costly repairs or replacements out of pocket, you can rely on your warranty to cover the expenses. This can be particularly beneficial if you’re on a tight budget or if you prefer to have predictable and manageable home maintenance costs.
Should you get a home warranty to avoid hidden costs?
Now that you understand the benefits of home warranties, the decision to get one ultimately depends on your circumstances. Here are some factors to consider:
Age and Condition of Your Home: If you’re purchasing an older home or a property with outdated systems and appliances, a home warranty can provide valuable protection. Older homes often require more frequent repairs, and having a warranty can ease the financial burden of unexpected breakdowns.
Financial Preparedness: Assess your financial situation and determine if you have enough savings to cover potential major repairs or replacements. If you prefer to have a predictable monthly expense for home maintenance, a home warranty may be a wise investment.
Personal Risk Tolerance: Consider your comfort level with handling unexpected repairs. Some homeowners prefer having a warranty, knowing they’re protected from significant financial burdens. Others may feel confident in their ability to manage and cover such expenses on their own.
Home Inspection Report: Review your home inspection report thoroughly. It will help you identify potential issues and give you a better understanding of the condition of the systems and appliances in your new home. This information can assist you in deciding whether a home warranty is necessary.
Owning a home involves more than just the initial purchase cost. Understanding the various expenses that come with homeownership is crucial for financial planning. While there are hidden costs to consider, such as home insurance, property taxes, HOA fees, and routine maintenance, a home warranty can offer valuable protection. Assess your circumstances, the condition of your home, and your risk tolerance to determine if a home warranty is worth the investment for you. Ultimately, ensuring the safety and comfort of your home is well worth the consideration of a home warranty.
