Learn Me Home Ownership Costs

Ian F wrote: I've lived in my house since 1992. Actual maintenance expenses have been minimal. Roof in 1995. A couple of water heaters. I pay roughly $350/year for the oil forced-air furnace service contract. About $1800 for a new garage door earlier this year. And that's been pretty much it. However, it also shows. Pretty much everything in/on my house needs attention. The list of needs is about a mile long and it's hard to know where to start. What I really need to do is move out and do a complete gut-remodel. How much that will cost is a big question mark. But your point about rent is worth mentioning again - my house was paid for in 2013 and I've been mortgage free since, although I have to budget around $300/mo. for taxes (and write the checks for them in April and September). Not all neighborhoods have HOA's. The guys who live in the house next to me have more cars than I do.

I got my house in 93- have done similar work- but added windows and well as some remodeling that our old house needed pretty badly. So costs have been more- I think I've invested easily as much as the purchase price of the house.

Which is to point out that the best answer here- "it depends".

One cost that nobody has brought up, yet- Appliances. We've been through 2 'fridges, 2 gas stoves, 2 microwaves, and two dish washers. Thankfully, the washer and dryer set I got early on are still working pretty well.

Similar stories as others WRT water heater and HVAC.

Also, depending on your rental situation, furniture can be a big part, too.

BTW, you really need to run the numbers pretty closely- if you plan on leaving within 5 years, I'd stay renting- you pay off very little of your principle and pay a whole lot of interest that isn't ever coming back. And 5 years of growth in value isn't going to be much. Better than nothing- but when factoring what is going out, raw- the numbers may not add up. A house is a good "investment" over a long run. And it's only going to return that investment when you sell it- which may just help your estate.

Sky_Render wrote: BTW, I don't mind minor repairs. Painting can be fun, flooring doesn't look too difficult, I can do electrical stuff (I'm an EE by trade), I've done minor plumbing, and my FIL is a master plumber who would hopefully install a hot water heater in exchange for pizza and beeer.

Slippery slope. How much do you value your time? I went in with this attitude. Got a kickass 2 car (4 miata) garage thinking I would spend so much time working on cars & bicycles. Turns out I spend significantly more time doing house things and very little time enjoying the garage.

Choose your battles.

One thing to remember - if you buy a house and are smart about it, at some point you'll stop having to pay a mortgage. That'll never happen with renting. We've been in our house since 2006 and paid it off this year. All of a sudden there's a big chunk of money every month that wasn't there before.

I'm going to second the recommendation to not buy as much house as the bankers say you can buy. They're in the business of lending money, so they want to loan you as much as possible. The Realtors (TM) get paid on a percentage, so they'll keep pushing a little further past your maximum budget. That's how you get in trouble. Set your budget before you start looking and stick with it.

If you're willing to do your own work, the costs go down dramatically. For example, I had to replace my water heater a few years ago. It's just a tank with a couple of hookups, so it cost me about $350 to go to Home Depot and pick up the exact same model as the 15 year old one that gave up the ghost. Installation was quick and easy, just a couple of water lines and a gas line. Probably would have taken more time to call a plumber.

I spend most of my time working on cars and bicycles. And this past weekend, beehives :) I don't have to spend much time on the house because it's a solid 1976 build that doesn't have any fundamental weaknesses. I have done a lot of work on the house over the years, such as building a new kitchen. But building stuff is fun. If you stay on top of the house when it tells you it needs attention, you can keep the costs under control.

In reply to alfadriver:

True about appliances. One stove, one dishwasher, washer and dryer (currently using a dryer I got free from the ex-, but will need new ones soon).

And I agree DIY for most house work is pretty basic. Often it's the time that is the restriction more than skill/knowledge.

Take all emotions out of the purchase.

Buy smart.

Make sure you love the neighborhood, you're looking in!

Do research on the local market values, over the past 10+ years.

Find a really good inspector! Don't listen to your realtor about any suggestions, find one on your own. It's easy enough these days to research a company.

Anything can fail, and it will at the most inconvient times. I would keep a reserve of $10,000 or more kicking around, solely for any random failures that will occur. If you're handy with a car, chances are the majority of house repairs are something you can do. YouTube is great for this. I've saved thousands and thousands, by simply learning from YouTube.

Purchasing a home doesn't always make financial sense, and renting does have its upsides in certain markets. If taxes are sky high in your area, and property values haven't climbed much in the last 10+ years, renting might continue to make sense.

There's a million other factors, those are the basics.

Sky_Render wrote: I've got *way* too many friends who bought a house, only to end up "house-poor." You know what I mean: they overleverage themselves with a mortgage payment, then something breaks on the house and they end up further in debt rebuilding the HVAC or replacing the roof and now they can't do anything fun anymore because they're broke.

Ummmmm, this is a very easy problem to avoid. Don't spend more than you are comfortable.

You're mortgage broker/banker/etc will be able to go over what everything is going to cost, payment/insurance/taxes, then you don't buy more house than you are comfortable with.

As for SWMBO wanting to be in a neighborhood? When you say "outside of town" if you literally mean a chunk of land with no one around, you'll pay significantly more for the same house than in an addition. Utility drops, septic (water well possibly) etc

I bought my house in September. So far, I've spent about $1,000 on maintenance. This includes two window unit AC's for when the central ac went out and we were on an extremely tight timeline with two very furry dogs who would be there for 4 days in the heat if we didn't do the window units.

Then a lawnmower, a blower, a carb for the lawnmower, paint for the interior rooms...

I'm budgeting about $100 a month for our water heater--that is 22 years old and overdue. Our roof is also about 25 years old. It's in really, really good shape, but it's at the end of it's expected lifespan. So we need to start budgeting for that.

The deck will need to be rebuilt in a year or two--I may try to do that one myself.

Look at everything in the house while the house is empty. AC, furnace, toilets, water heater, windows, stove and oven, etc. Throw in some other things like a Dehumidifier and any other appliances that you'll supply. Ask yourself, how much would it take to replace this, how likely is it that I'll need to, and when will I need to do it?

Btw, we opened up a 0% credit card (15 mos) for a combo of the vet bills and the AC--that way we didn't have to touch the emergency fund.

Oh, and budget out everything in your life. Remember to include retirement savings of 20%, minimum. Figure out how much you can spend a month on housing--and figure it out if you or your wife loses your job how much you can spend a month.

The amount that we were approved for was wayyyyyy above our budget. I don't know how they expect people to eat.

The biggest part of house affordability is making sure the payment is a responsible percentage of your income. This magic amount will vary depending on debt/income levels, but the smart money guys usually say to budget 30% or less of your monthly take-home income towards mortgage/taxes/insurance. Obviously the lower you can get that number, the less likely you'll be to run into financial trouble. Sticking to this rule should allow you to have enough surplus to save up for major repairs, or upgrades that you might want to do while hopefully leaving some extra income for you to play with/invest/whatever.

Lenders will offer you far more than this amount and say that it's perfectly normal (Sadly it may be). Don't take the bait. At a minimum, it will cost you lots more money and it will increase the risk of you struggling or losing your home completely. Play it safe with the budget when it comes to a roof over your head and you'll be fine.

Also, good luck in this market! It's extremely competitive for buyers right now which drives costs up, and will likely test your patience. You might miss out on a few before you get one. Having your ducks in a row can work to your advantage if you're able to act quickly and get an offer in, as well as be ready to close without any contingencies.

If we buy a house, we're figuring out our "maximum" home price and sticking to that, regardless of what the bank says. (After all, they just want to make money.)

And my other plan is to tell the relator that our price range is below that number, too.

And YouTube is the shiznit. I actually pay a little cheaper rent because I have a deal with my landlord that I fix minor issues myself. It's good practice for home ownership. So far, I've repainted half the house (including using scaffolding for the dang stairwell), rebuilt three toilets and completely changed the hardware in the master bathroom. Figured out how to do all that on YouTube.

Has anyone had a house built? One of the things we were thinking about was buying a piece of property sooner rather than later and then building a house on it in a couple years. (Property value seems to be what goes up, not necessarily the value of the actual house.)

In reply to Sky_Render:

We looked for houses for 2 years before it worked out with the right one. During that time we considered buying land and building new. We got significantly less house for our $ with the new build approach.

Bought my first place in August and home ownership has been great so far. I'm spending more than when I was renting, but not by a whole lot and it's a much nicer place than what the rental was anyways. We've spent a couple thousand so far on maintenance and repairs, the big ticket item being some masonry repair that we knew we were going to have to do going into it. There's some other stuff coming up as well, furnace is getting up there ect, but again, we knew what we were getting into, especially considering it's a 170+ year old house. SWMBO and I each put away a few hundred extra out of each paycheck towards a maintenance/repairs slush fund and deal with stuff as that accumulates.

If you live within your means and budget well, home ownership doesn't need to be a scary dark cloud hanging over your head all the time. I'm fairly sure we could have gotten approved for at least 3x the mortgage we did, but just barely scraping by to make the mortgage payment each month would have sucked. As it is, we could easily afford the place on one salary if we had to.

In reply to NOHOME:

You must have had an utterly craptastic homeownership experience to be so bitterly against it.

I spend a couple hours a week or less taking care of my 1/4-acre lawn in the growing seasons. I spend a couple hours every couple of months taking care of some minor repair task on my house, and it's 50+ years old at this point. Seriously, I spend less time working on the house then I do on routine car maintenance.

Each of us has our own experiences and preferences, but your posts read like you paid over-the-top-dollar for a used lemon BiTurbo and had all the work done at the Maserati dealer.

Sky_Render wrote: One of the things we were thinking about was buying a piece of property sooner rather than later and then building a house on it in a couple years.

I'm an architect. Of course I wanted to build a new house. When we were shopping in our late 20s (early 1990s), we found out we could afford a new house or property to put it on, but not both.

Duke wrote:

Sky_Render wrote: One of the things we were thinking about was buying a piece of property sooner rather than later and then building a house on it in a couple years.

I'm an architect. *Of course* I wanted to build a new house. When we were shopping in our late 20s (early 1990s), we found out we could afford a new house or property to put it on, but not both.

The way you phrased that makes it sound like you were part of the Tiny House movement 25 years ago.

Sky,

Consider looking a little north to Adams County, Pa. Prices are much lower than Frederick County and it an easy commute down Rt 15.

In reply to Don49:

And as a bonus, no emissions inspections.

I like working around the house. I see a house like a project car, but unlike most project cars you can actually get your money back out of a house, if you buy a house similarly to how you buy a project car. Doing things that making your car look dope are worth the money. Suspension, wheels, etc help sell the car, just like landscaping and neighborhood can help sell the house. People say "buy a house with good bones". I like to say "buy a house that needs maintenance, not repair." Maintenance items are often cheap and require labor. Repair items (roof, appliances, additions, etc) often cost lots of money. Don't buy an overpriced project car missing a motor and wiring harness. Buy cheap and be realistic about the maintenance and repairs you can do yourself and/or afford to pay someone else to do.

We looked at a $240k property that had a perfect property. Thing was, the house was a tear down. It didn't make sense to pay $1050 a month in mortgage but need to be shelling out $3000 a month to a contractor for renovations. Or, we could have taken a mortgage+construction loan for $340k, but then we'd still be living in a construction zone for a year. No thanks. A project house should be a like a project car. You've got a daily driver (a house you can live in while working is being done), you can afford all necessary repairs and modifications out of pocket (not taking big loans) and the property should be cheap enough that there is virtually no risk of losing money (value can be increased through labor, not investment).

I bought my first home in January at $300k. It has needed virtually nothing being 9 years old. So far I've spent maybe $250 on a maintenance items. Maybe less. I might need a dishwasher, but we're dragging it out till its really dead. I need to widen my parking area - expected cost is about $1500-$3000. I want to build a better walkway around the side of the house - expected cost $300.

Now, we were renting for $1550, with an expected rental increase of $150 to $1700 total. We could not find anything cheaper that met our needs for less than $1300 and that required tremendous amount of luck, and most of those rental would mean increasing our commute time by 15 minutes. I could get a smaller rental for $950-$1100, but we're talking 1-bed 1-bad no garage and kinda crappy.

So I said "I'm not going to exceed my current rental cost." and we just barely did. Our mortgage + insurance + taxes are $50 cheaper than our previous rent + insurance. Our utilities are similar, we pay more for heating.

If I could do it again, I would've held out for a nicer neighborhood. A Two-Car garage with proper parking would have been nice too. And a proper laundry area (ours is in a closet) would've been nice. But does it beat our previous apartment? hell yea.

TL:DR don't overspend, stay close to work, be realistic.

Another thing:

In hindsight, I have rented quite a few places that it would have not been worth owning those houses. As in, the rent was cheap enough that the extra $200-$300 over the mortgage that I was paying was well worth it.

There have been places where it would have been better to own, due in part to increasing values and the ability to rent at a profit.

Don't buy someplace if you can rent an identical property for an extra couple of a hundred dollars.

Ha! I wish I could live close to work. A 30-mile one-way commute is mild around here. Very few people can afford to live where they work in the DC area.

A rule of thumb to budget for maintenance is to plan on, at minimum, one month payment per year. More is better. All the issues people have elaborated on here are real issues. Don't let that overwhelm and panic you. If you can save more, the better.

We just had a $9,500 roof replacement. We are now planning on the same for our rental houses next year.

Just plan and budget. You said you saved 20% down, so you are clearly more than capable of success!

One thing about building houses - it's like buying a new car vs buying a used car. Buying new (building cost) is often a lot more expensive than buying used. IIRC the rebuild cost on our house is at least $50k over what we paid for the place.

BoxheadTim wrote: One thing about building houses - it's like buying a new car vs buying a used car. Buying new (building cost) is often a lot more expensive than buying used. IIRC the rebuild cost on our house is at least $50k over what we paid for the place.

haha, our home is insured for about $30k less than we paid for it. Of course, the empty lot is worth more than we paid for the house.

So it looks like the recurring, monthly costs with a house are:

1. Mortgage Payment (that goes away after 30 years or less)
2. Property Tax
3. Homeowner's insurance
4. HOA fees (maybe)
5. Utilities (which I'm already paying)

Anything else I'm missing? Obviously that doesn't include upkeep or maintenance, but that's something I'd be saving for anyway. Note that I'm assuming 20% down to avoid PMI.

My concern here is I want to make sure I can budget for the monthly costs and still be able to save money and have something left over to have fun with.

Where do you live currently? House, apartment, townhouse?