LOVELAND – If you’re a first time home buyer, it is important to understand the different financial obligations of owning a home. There are fixed, variable, and unpredictable expenses to consider. Properly budgeting for all of these will help you better manage your finances as you enter into the world of home ownership.
Fixed home ownership expenses
Fixed expenses are the easy ones as you’ve probably already thought of them when estimating how much you’ll spend each month. The most obvious fixed expenses are your mortgage principle, interest, and PMI payments. If you have a fixed rate loan, then these figures will remain the same for the entire life of the loan.
Some expenses are fixed for now, but do have the potential to change in the future.
– Homeowner’s insurance
– Condo/association fees
– Property taxes
– Cable/internet fees
These could change once every year or, in the case of cable/internet, when your contract comes up for renewal.
Variable home expenses
Variable home expenses are the more challenging ones to budget for. They could change from month-to-month depending on the climate, number of occupants, personal habits, etc. Examples of variable expenses are:
– Cable and Internet
– Gas, Oil or Other Heating Fuel
– Water and sewer
– Air or water filter replacements
– HVAC maintenance/check-ups
To estimate these variable expenses, you may ask the current residents of the home that you are purchasing for a history of their utility bills. However, keep in mind that your usage may be quite different from theirs.
There are also seasonal expenses to consider. For example, during Spring and Summer months, you may incur expenses for lawn fertilization and maintenance. During winter, you may need driveway plowing or snow clearing from your roof. Some of these can be avoided if you choose to do-it-yourself. The important thing is to think about whether you will need them so you can properly budget for the expense.
Unpredictable home expenses
Unpredictable expenses are the not-so-fun part of home ownership since they often relate to issues with your home. Examples are:
– Heating Repairs
– Electrical Repairs
– Plumbing Repairs
– Air Conditioning Repairs
– Appliance Repairs/Replacements
– Exterior Home Repairs (Roof Shingles, Porch/Deck Issues, Painting, etc.)
Regardless of whether you have a newer home or an antique one, unpredictable expenses will definitely arise along the way. Setting aside funds to cover them will make it less painful when problems do occur.
Preparing for your first home
A common mistake that first time home buyers make is under estimating home ownership expenses and taking on more than they can handle. In addition to estimating fixed expenses, it is important to take into account the common variable and unpredictable expenses. Home ownership can be very profitable and rewarding, if you are well informed in your decision making.
By Suzanne Plewes, RE/MAX Alliance in Loveland