It's one thing to go from renting an apartment to buying an apartment, but going from renting an apartment to buying a stand-alone house is a whole other story. Not only will an actual house most likely be larger square footage-wise, but houses come with a world of hidden expenses that apartments don't necessarily share (even when you own one).
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If you're buying your very first house, here are a number of costs you're likely to face.
1. Closing costs
Though this is true of any type of home you buy, signing a mortgage doesn't just mean forking over your down payment; it also means shelling out additional money for closing costs. Closing costs typically equal 2% to 5% of a home's purchase price, so if your house costs $300,000, expect to pay anywhere from $6,000 to $15,000 up front. Now some lenders will let you roll your closing costs into your mortgage, but that's not always the case -- so be sure to have that money available when you sit down to finalize the deal.
2. Property taxes
Property taxes go hand in hand with homeownership, but if you're buying a house, you might come to pay more than someone who decides to purchase an apartment. That's because in addition to all that interior square footage, you're getting actual land to enjoy as well. The average U.S. homeowner pays $2,127 in property taxes, but in some parts of the country, you might pay 10 times as much. Be sure to factor property taxes into your budget when deciding how much house you can afford, keeping in mind that, unfortunately, they have a tendency to rise over time.
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3. Homeowner's insurance
Even renters are wise to get insurance to cover property damage or loss, but if you're a homeowner, insurance is downright required. Not only that, but you'll probably pay more for insurance when you buy a house as opposed to an apartment, since your insurance company is taking on the risk of not just interior damage but external damage as well. The average U.S. homeowner currently pays $964 a year for homeowner's insurance, but depending on the size of your property and where you live, your bill might be much higher. The same holds true if you have a swimming pool or other potential safety hazard.
4. Private mortgage insurance
Not everyone manages to come up with a 20% down payment for a house. If you're not putting 20% down, expect to pay private mortgage insurance, or PMI, which serves as a means of financial protection for your lender. PMI is typically tacked on as a premium to your monthly mortgage payment, and it usually equals 0.5% to 1% of your home loan's value. So if you take out a $240,000 mortgage at 1% PMI, you'll pay an extra $200 a month. Ouch.
5. Interior maintenance
When you own a home, you're responsible for all interior maintenance items. So if your house is large enough to require two separate air conditioning units, you'll have two yearly tune-ups to pay for. Similarly, the more rooms your house has, the more you'll need to spend on carpet cleaning, window sealing, and the like.
6. Exterior maintenance
Just as buying a house means taking on the cost of interior maintenance, so too will you have to worry about ongoing outdoor maintenance. Be prepared to fork over a pretty penny for things like lawn care, gutter cleanings, and pressure washings.
If you lived on your own before buying a house, you probably have some furniture to take with you. But if you're going from an apartment to a much larger property, you're going to have a whole lot of space to fill. While you don't necessarily need to furnish your new house right away, over time, you're apt to spend money on bedroom sets, chairs, sofas, and accent tables. Be sure to incorporate these costs into your budget so you're not stuck with a host of empty rooms for years on end.
8. Higher utility bills
It takes more energy to heat and cool a 3,000-square-foot house than it does for an apartment one-third that size. If this is your first time buying a stand-alone house, be prepared for your utility bills to skyrocket, especially if you live somewhere with notably cold winters and oppressively hot summers.
9. Sewer service
When you live in an apartment, you probably don't put much thought into the water that runs through your pipes. Chances are, you don't even pay for it separately. But when you buy a house, not only are you responsible for covering your water bills, but you'll often be required to pay for sewer service into your home as well. Now if your house isn't connected to a public line, you won't get charged for sewer service, but you will require a septic system -- and that's a whole other set of costs to contend with.
10. Pest control
You'd think moving out of an apartment would mean ridding yourself of unwanted little creatures -- but not so fast. Many houses require regular pest control treatments to keep termites, carpenter ants, and other such undesirable visitors at bay. And because you're covering more space than you typically would with an apartment, you can expect to pay more.
11. Snow removal
If you live in a part of the country that tends to see its fair share of snow, you may be in for an unpleasant financial surprise come wintertime, and that's the cost of snow removal. While some homeowners opt to tackle snow removal themselves, if you have a large property or an injury preventing you from doing what can often be a back-breaking task, you may need to call in the big guns -- and that could put a strain on your budget if you aren't prepared for it.
12. Tools and equipment
You don't want to call a handyman every time you run into a problem, but unless you have a reasonably loaded tool chest, you may not be able to tackle all of your home projects and maintenance yourself. If you're buying your first house, expect to spend some money at your local hardware store. Though your new collection of hammers and wrenches might be a one-time expense, it's probably not the sort of thing you can put off.
13. Cleaning supplies
There's a difference between cleaning a modest-sized apartment and a much larger house. Though you'll need the basics -- think tile cleaner and disinfectant spray -- regardless of where you live, you'll require much more of it once you move into an actual house. Furthermore, if your house comes with features your old apartment didn't have, like carpeted floors, you may need to add some new supplies to your list on an ongoing basis, all of which are bound to cost money, especially over time.
14. An alarm service
Just because you're buying a house doesn't automatically mean you need an alarm. But many people who buy houses decide to install alarm systems, both to protect themselves from intruders and to snag insurance discounts. An alarm service might add as little as $20 a month, or well over $50, to your overall expenses, and in many cases, you'll need to pay to have an actual system installed -- which could be a multihundred-dollar expense right off the bat.
15. Home repairs
As a homeowner, it's critical to factor regular maintenance into your budget. But what about the expenses you can't predict, like when your roof springs a leak or your water heater goes kaput? If you're buying a stand-alone house, be sure to pad your budget to cover the repairs you'll inevitably face. And, unfortunately, the larger your property, the greater your chances of encountering some sort of expensive disaster.
Buying a house means taking on a world of financial responsibility. Before diving in, crunch some numbers to see what you can truly afford, and make sure to have a decent amount of emergency savings on hand. You never know what sort of expenses homeownership will bring about, so the more prepared you are, the less stressful the process is likely to be.
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