Tina McManus' Blog
There’s no denying that purchasing a home requires a huge investment from buyers. Not only will you need to have a down payment in place, but you’ll need to consider closing costs, home maintenance, property taxes and more over the years. While these are all expenses that most buyers are aware of, there are other “hidden” costs that come along with owning a home as well. In fact, many people say that the true cost of buying a home can be up to 4 times the sale price. So, what hidden cost should you be aware of and why do we think they’re all 100 percent worth it in the long run?
3 Hidden Costs of Owning a Home
1. Mortgage Interest
When you look at the amount of money you’ve borrowed to purchase your home, you may be tempted to plan to repay that sum over the next few decades. But you should also be accounting for the interest payments attached to your mortgage loan. Additionally, mortgage interest works slightly differently than the interest on a traditional loan. For example, if your interest rate is 4 percent, you won’t likely be paying that much annually. Towards the beginning of your mortgage, about half of your payment will be going toward interest alone.
2. HOA Dues
If you’ve purchased a home that’s part of a “community” of properties or a homeowner’s association (HOA), you’ll be required to pay association dues. While these additional fees are usually disclosed during the sales process and come with a variety of benefits, they can be subject to occasional one-time assessments or special projects that will increase your dues. On average, HOA dues cost American homeowners anywhere from $200 to $400 each month.
3. Updated Security
When you purchase a home, it’s in your best interest to change all the locks on the external doors. Unfortunately, there’s really no way to know how many copies of the original keys may be out there, so this is the best way to protect yourself. Additionally, if your new home has a security system in place, you’ll need to figure out how to program it to only be accessed by your computer and smartphone. Previous owners or tenants shouldn’t be able to access the property via their phone!
Are These Costs Worth It?
Yes! While these hidden homeownership costs can be a pain at first, when it comes down to it owning a home is the right choice for many people across the country. As long as you are prepared for the unexpected, homeownership can be a positive experience and a sound investment.
Few things are more mysterious than insurance. When you think you know what's covered, you find out the hard way that it wasn't. Since your home is likely your greatest asset, you want to know what it includes and what it doesn't before you need to make a claim. Whether you're “in good hands” or in the hands of a small company mascot, you need to be fully aware of where your coverage stands.
Few people actually make a claim on their insurance outside of catastrophic coverages. Here are some basics on homeowner’s insurance coverage:
- Damage from fire and smoke
- Wind or hail damage
- Personal property theft
- Damage from vandals
- Ice and snow damage including water damage or a collapsed roof
- Damage from internal water sources (washer, dishwasher, broken pipe) but not from external flooding caused by rising rivers, seepage or groundwater.
- Losses caused by others during a civil disturbance such as a protest or riot
- Explosions caused by gas appliances or other combustible materials
- Damage from vehicles or aircrafts
Policies set limits on coverages for damage to landscaping, fencing, pools, garden sheds, workshops and barns. Most policies cover contents up to a dollar limit as well but allow you to add extra for jewelry, firearms, artwork, antiques and the like.
Often, your policy has a provision for temporary living expenses if your home is rendered unlivable by a covered event. Also, most policies include liability if a family member, guest or even a delivery person is injured on your property or bitten by a pet. However, providers reserve the right to exclude specific breeds of dogs, so check with your provider to make sure you’re covered.
Items typically not covered include natural disasters such as earthquakes, hurricanes and floods. When your home is in one of these areas, often a particular rider or separate policy is required for coverage. Other items usually excluded include sinkholes, mudslides or damage due to an act of war. Most often, accidents caused by a nuclear event — even a nuclear power plant — do not have coverage.
Before signing for coverage on the dotted line, make sure your insurance agent thoroughly explains your coverage and exclusions so that you're not surprised if calamity hits.
One of the biggest benefits to buying a home is that of the tax savings for you. You own a home now, so there’s no more monthly rental payments going out the window. All of your mortgage payments are going towards your financial future. There’s many different types of tax breaks that you can get from owning your home. Many home improvement projects that allow you an extra tax break are hiding right in the fine print! Tax breaks are known as “incentives.” These incentives are essentially what help people to get important things in their homes done without having a order placed on them. There are some hidden things that you may not have known could be used as tax write-offs.
From putting solar panels on your home to replacing appliances, there are certain tax breaks that you can get for making your home more energy efficient. There are lifetime caps on these deductions, but on a certain year, you’ll be able to save some extra money on your taxes. Some of the deductions that you might be able to claim include:
- Air-source heat pumps
- Biomass stoves
- Central AC units
- Water heaters
- Certain energy-generation systems which include an array of things like water heaters, solar panels, fuel cell systems, wind turbines, and geothermal heat pumps.
You can deduct somewhere in the neighborhood of 30% of the cost of these improvements to your home. It doesn’t hurt to check on the updated standards that are introduced each year by the government. Your accountant can help you to understand your own deductions a bit more in-depth.
Modifying Your Home For Medical Needs
If you need to modify your home in order to accommodate medical needs, you may be eligible for a tax deduction. The modifications must not increase the value of your home and be medically necessary. If the doctor tells you to lose weight and you put in a home gym, you can’t deduct that. If you need a ramp put in your home for wheelchair accessibility, then that can be deducted. The cost of the modifications generally has to exceed 10% of your adjusted gross income, or 7.5% if you’re over the age of 65.
What’s Not Deductible
If you have done some major remodeling around your home, it’s sad to say that these improvements probably aren’t tax deductible. On the positive side, you will get a bigger return on your home when you do decide to sell it. This could help you to reduce any capital gains tax that you may have to pay on the sale of the home.
Remember that when you make improvements to your home, you’re doing it first for your own needs. Any tax write-offs that you may get are merely a bonus.
If you want to buy a house, it pays to enter the real estate market with a checklist in hand. That way, you can streamline the process of going from homebuyer to homeowner.
Now, let's take a look at three things to include in your homebuying checklist.
1. Your Budget
Your budget will dictate whether you're able to afford a condo, luxury home or something in-between. As such, you'll want to assess your finances closely as you determine exactly what type of house that you can afford.
Oftentimes, it helps to get a copy of your credit report. You are eligible to receive one free copy of your credit report annually from each of the three credit reporting bureaus (Equifax, Experian and TransUnion). If you know your credit score, you can determine whether now is a good time to enter the real estate market, or whether you should improve your credit score first.
You may want to consult with several banks and credit unions too. These financial institutions can teach you about various mortgage options and help get pre-approved for a mortgage. Then, once you have a mortgage, you'll know exactly how much you can spend on a house and tailor your home search accordingly.
2. Where You Want to Live
Living in the suburbs is very different from residing in the city. Therefore, you'll want to consider where you want to live so that you can search for a home in specific areas.
For example, if you prefer the peace and quiet of a small town, you may want to consider houses in small towns in the state of your choice. These towns may feature dozens of available homes. Plus, in many instances, small town houses are priced lower than big city residences.
Or, if you enjoy the hustle and bustle of the big city, you can search for residences in any city, at any time. These houses likely will ensure that you'll have quick, easy access to a variety of big city attractions and landmarks.
3. Real Estate Agent
There is no telling whether you're about to enter a seller's or buyer's market, as the housing sector often fluctuates. Fortunately, if you hire a real estate agent, you can increase the likelihood of a quick, successful homebuying experience, regardless of the current housing market's conditions.
A real estate agent is committed to your homebuying success and will do what it takes to help you find the right home, at the right price. He or she will learn about your homebuying goals and offer expert insights into the real estate market. Also, if you ever have homebuying concerns or questions, a real estate agent is available to address them.
For those who want to streamline the homebuying process, it helps to hire a real estate agent. And if you hire a real estate agent today, you can get the assistance that you need to make your homeownership dream come true.
Get started on your homebuying checklist, and you can simplify the process of acquiring your ideal residence.
Your kitchen is an often used room and can become cluttered very quickly. There are plenty of strategies that you can use to keep the room in order. Below, you’ll find tips that will help you to keep your kitchen decluttered and your supplies organized once and for all!
Make Space For Storage
This sounds like an obvious need in any room of the house, but the kitchen is a place where you need ample storage. There are a few ways to do this. Outside of your cabinets, you can install freestanding storage units, like shelving or extra cabinets. Even an armoire can help you to have a space to beautifully display your dishes.
Under your sink, you can keep your most frequently used items like soap, sponges, and detergent in easy to access solutions. Either install a small turntable, or simple get bins that can be labeled and pulled out as needed. This will keep everything you need together neat and tidy. It will be difficult to actually disorganize this space once you have completed this small task.
What would a kitchen be without coffee? If you brew a cup of joe every morning, you’ll want easy access to coffee supplies. Dedicate a space next to the coffeemaker where you’ll keep the coffee, mugs, beans, and other supplies. You can even keep your travel mugs near this space within reach when you’re running out the door. If there’s little room on the counter, hang hooks on the wall to keep coffee mugs and travel mugs out of the way.
Tackle The Trash And Recycling
There’s nothing worse than having trash and recycling all over your kitchen. Keep these items concealed in dedicated cabinets. The perfect place for the trash and the recycling is next to the sink since that’s the most convenient location for the trash to be in.
The recycling will follow the same pattern as it needs to be rinsed out and ready to go outside in the bins.
Keep The Family Organized
A kitchen is a great place for you to have a center of communication for your family. This is where a bulletin board can be placed with important documents. A calendar listing all of the family’s activities and appointments can be hung for everyone’s reference. This area make use of a small space that would otherwise be wasted in your kitchen. It also serves a dual purpose in keeping the family organized.
Small changes can make a big difference in the kitchen when it comes to clutter, storage, and organization. Once you get started, keeping the clutter at bay can be very easy.