When you purchase a home you will either pay cash or finance the cost of the home with a mortgage or other means of financing. Financing a home includes a monthly mortgage payment, unlike a cash purchase. But are there other factors that are included in home ownership? Are there hidden costs associated with owning a home? In one word, "YES!"
If you have a mortgage, you'll pay principal + interest + taxes + homeowner's insurance. If you pay cash, you avoid interest, but you still have to pay the principal amount + taxes + homeowners insurance. But there are still ongoing costs associated with home ownership.
The ongoing expense every month escapes no one. Every home will have utility bills associated with electricity bills, water, maybe natural gas or propane. And these costs are rising and can be as much as a car payment depending on your energy usage, age of the systems and components, and the size of your home.
If you've mitigated those expenses by having your own well for water, you still have a bill as it takes electricity and maintenance to operate the well to deliver water to your tap.
. Maybe you've made changes to the construction to make the home more energy efficient. But you still have some type of bill as there are additional costs to deliver electricity to your home. Maybe you've added solar panels to eliminate your electric bill. You'll still have to pay for those solar panels to offset your electric bill. And the utility company still charges fees to provide electricity, even if you offset the bill with energy efficient features.
So, the total cost of home ownership includes principal, interest, taxes, insurance and utility charges. Consider these when purchasing a home, not just the amount you pay for the home.
If you're a buyer, make sure your real estate agent asks for a year's worth of utility bills for the home they want to purchase. Also consider how many people currently occupy the home versus the number of occupants that will be moving in. Everyone has different habits and utilizes energy differently.
All of these considerations will better prepare a buyer to manage the total cost of home ownership on their next home.
