Buying a house is one (big) payment, but there are other costs when it comes to your house budget. We’ve added up all the extras, including bills and just-in-case expenses, to estimate on top of your mortgage.
You made an offer based on your budget down to the last penny and it was accepted: congrats! Don't forget to add the other costs of homeownership that go beyond a typical renter's situation.
1. Property Taxes – (Fluctuates annually) Let's start with often the most expensive: taxes on your home. Property taxes are determined at the state and local level. You can learn about Washington state taxes here.
As a homeowner, you pay an amount that's based on the value of your home. That money is then divvied up to both the city you live in and your state. As property values increase, so typically do property taxes. Each year, your lender usually sends a notice summarizing if you'll need to pay more or less based on new property tax requirements. In years that taxes increase, you will need to pay the shortage – the difference in what is now owed due to the increase. You can opt to pay the difference, or roll the additional amount into your monthly bill.
If property values decrease, you may opt to receive a check for the overage, or keep the money in your escrow account to anticipate for years that will have shortages. At BECU, most homeowners bundle their property tax in their monthly mortgage payment.
2. Homeowner's Insurance – (Fluctuates annually)
If you acquire a home loan (and didn't pay for the house in outright cash), then your lender will require you to also acquire insurance against the house. This ensures that if something happens to the house, it will be rebuilt and their investment is saved (as is yours!). Shop around – homeowner insurance fees can vary by provider and service.
Your monthly insurance is often significantly higher than renter's insurance. It's typically bundled with your mortgage payment, and paid by your lender. If you receive a home loan from BECU, your homeowner's insurance and property taxes may be part of your mortgage payment .
3. Homeowner's Association Fees – (Fluctuates annually)
Many neighborhoods now require dues that pay for neighborhood maintenance that the city doesn't cover. Because it's usually an annual payment made once a year, ensure you'll have enough in savings. Since BECU doesn't charge members for creating multiple accounts, why not create a separate account for your HOA fee? Doing so allows you to set aside the money every month.
4. Emergency Fund – (Optional)
Create a dedicated savings account and let it grow. Set rules on how and when you'll allow it to be used so it can be there in times of need. You may even want to create this savings fund at a separate financial institution than the one that you regularly use. This tactic keeps you from seeing the funds and spending them.
5. Cosmetic Repairs or Improvements – (Optional)
Small repairs, such as staining a deck or updating a room's paint color, aren't too costly, but can add up. Consider incorporating a small home-improvement fund into your monthly bills. It can help you make these improvements without breaking your budget. Major remodel projects, in contrast, require serious saving (e.g., new countertops). Many homeowners often turn to a home equity line of credit (HELOC).
6. Longterm Repairs – (Optional)
Your roof may only be five years old now, and your house freshly painted last year. But eventually the house will need repainting and the house re-roofing. Those costs are inevitable long-term and hefty repair costs. Looking ahead to the future now allows you to not panic later. Homeowners either create a separate savings account (separate from the emergency fund), choose to use extra checks/bonus money, or even account for these major repairs by using a HELOC.
7. Utilities – (Fluctuates monthly)
Sure, you pay utilities now as a renter. But are you moving from 900 square feet to 2,400? Have you only used showers and now have – and plan to use – an immense soaking tub? Did you just buy a lawn that your homeowner's association will expect you to keep watered? Perhaps your home has both heating and air conditioning. Expect your electric, gas and water bills to adjust accordingly. Keep an eye on them – utility companies will provide average usage reports and help you estimate your future bills.