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“In fact, experts say to think of the monthly mortgage payment as
including principal, interest, taxes, and insurance.”

Hidden Home Costs: What You Don’t Know Can Hurt You

The first thing homebuyers want to know about a prospective new home is the listing price. More important than location, everyone wants to know how much a home purchase will cost before they can calculate the value the home might accumulate in the long run. What potential buyers, and particularly first time homebuyers, neglect to consider is that not all the costs of a home are reflected in the listing price. There are many “hidden costs” of home ownership such as closing costs, property taxes and routine maintenance, which buyers need to factor into their plans in order to make a successful long-term purchase. Some of the biggest hidden costs of home ownership are the preliminary inspections, closing costs, property taxes and insurance, and the ongoing costs of repairs and maintenance.

One of the first hidden costs encountered by homebuyers is the home inspection, which should be completed by a certified third-party company before the sale is completed. The benefit of paying for a home inspection is that it allows the buyer to identify any issues and problems, information which can be used during price negotiations to argue for a lower price. A standard home inspection report evaluates the condition of the home's essential systems such as the heating system, central air conditioning system, interior plumbing and electrical systems; as well as parts of the physical structure such as the roof, attic, and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement/crawl space, basement seepage and any visible and/or accessible structural elements. The inspection fee, usually several hundred dollars, saves a lot of trouble in the long run. Professionals also recommend that homebuyers order a related inspection for pests, especially wood-destroying termites, which costs about $200.

Closing costs, which encompass a host of administration and processing fees for tasks like underwriting, recording, surveys and title insurance, are paid on the day the homebuyer signs closing documents. The costs can run in the thousands, and often amount to between two to three percent of the mortgage loan amount. Buyers may wish to ask different lenders for estimates of closing costs when they are shopping for lenders, in case the difference is substantial.

For homeowners, a monthly mortgage statement reflects more than the amount of the loan plus interest. In fact, experts say to think of the monthly mortgage payment as including principal, interest, taxes, and insurance. Annual homeowners insurance premiums generally cost between 0.5 to 1 percent of the mortgage loan amount, while property taxes vary according to location, but can reach beyond several thousands dollars per year.

The cost of ongoing maintenance and period repairs is more difficult to estimate, and depends on the particular home and conditions. One common item to keep in mind is the costs of lawn care equipment or paying someone to mow the lawn. Repairs, which unlike in a rental situation become the sole responsibility of the homeowner, typically encompass problems like plumbing, electricity, and windows. It pays for homeowners to establish a fund to tap when issues arise.

Buying a new home includes many “hidden costs” beyond the all-important figure of the listing price. For first-time buyers in particular, it is important to consider some of the unexpected but more expensive items, such as preliminary inspections, closing costs, property taxes and insurance, and the ongoing costs of repairs and maintenance.

RE/MAX of Tenafly

                    RE/MAX Associates lead agents
                     of competing companies in
                    professional designations which
                 denote specialized training and
               education. They dominate the Accredited Buyer Representative (ABR), Certified Relocation Professional (CRP), Certified Residential Specialist (CRS) and Leadership Training Graduate (LTG) ranks. Read more...

About Orly Chen

  Orly Chen is a leading
Tenafly real estate agent
in Northern New Jersey
specializing in the Bergen
County area. Her
outgoing personality,
honesty and
approachability and
integrity make Orly
one of the most sought-
after agents in the
Northern New Jersey
real estate market

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