If you’re fed up with the high costs of renting a space, and you’d really like a place to call your own that you can modify without fear of losing your security deposit, buying a home is the only way.
But even though buying a home is definitely more affordable than renting, mainly because you’ll own the property at the end of the day, there are several hidden costs associated with owning a home; it’s not only the purchase price you’ll need to budget for.
So, if you’ve been browsing Florida real estate and think you’re ready to buy a home, we’ve listed all the costs you must budget for so that you’ll be as financially prepared as possible.
Firstly, you’ll need to afford the mortgage repayments and all the fees associated with obtaining a mortgage loan. Beyond the loan repayments, you’ll also need to budget for costs associated with the loan itself, like administration fees and potential application fees.
Unfortunately, you can’t secure a mortgage loan if you haven’t saved up at least 10% of the property price beforehand. This amount is considered a down payment or a mortgage loan deposit.
But even though 10% is the general consensus, it’s worthwhile to go the extra mile and save 20% to ensure you get mortgage loan approval. With this, the larger your deposit, the lower your repayments will be.
Next, you’ll need to consider the fees you’ll need to pay the lender for the use of capital. As mentioned, application fees are sometimes relevant. But beyond this, origination fees, credit report fees, and even other fees can add up to as much as 0.5 to 1% of the total mortgage loan amount.
Other lender-related fees might also include services like the appraisal of the property and a property survey. The info obtained from these surveys will be made available to you, although the primary goal of these surveys is to ensure the lender receives independent confirmation that the property is valued accurately and fairly.
Moreover, other expenses you’ll need to consider include closing costs. These expenses include attorney fees, taxes, and others that typically add up to about 15% of the property’s value.
Once you’ve purchased the home, you’ll also need to afford more than ongoing mortgage repayments; utility bills and property taxes are essential costs you’ll need to keep up with.
Another essential cost you’ll need to consider when budgeting to buy a home is maintenance costs. Unfortunately, it can be somewhat tricky to accurately determine the true maintenance costs of a property; you can roughly estimate this expense with the one percent rule.
The one percent rule suggests that home maintenance will cost roughly one percent of the property’s total value.
After considering and budgeting for all of these relevant costs, you’ll be ready to purchase a home with absolute financial confidence.