You’re finally ready to buy a house/condo/cottage, congrats! As you embark on this journey, one of the inevitable questions that will come up is, “how much will it cost a month to manage this house?”
Let’s break down the details so that you can be ready to manage the everyday bills that make a house run smoothly. Ready? Here are the top eight bills you need to know when managing a home.
1. Monthly electricity costs
Based on a recent study from The US Energy Information Administration, Americans have an average monthly electricity bill of $117.46. Assuming your first home does not come with solar panels on the roof, you will need to budget for and manage your electricity consumption to take control of your monthly energy bill and pay less than the average.
Your electricity costs will depend on how energy-efficient your home is. Naturally, older homes come with higher energy bills due to drafty windows, not having the latest insulation, and various other factors. You can help keep these costs down by making the most of your energy usage with some tips from the US Department of Energy.
2. Water and sewer
Americans spend around $1,000 a year in water costs, making it an important expense to keep track of and reduce. Every bath you take and each turn of a faucet will amount to a monthly water bill. Conserving water in your daily routine can help you keep these costs in check.
Water bills often come with the companionship of sewer costs. Each time you flush the toilet, you will pay a wastewater fee. The exception here is if your new home has a septic tank (though these can come with their own unique costs such as cleaning or pumping and annual inspections over time). Depending on the size of your home (one-bedroom condo, three-bedroom house, etc.) and where you live (city, suburb. country), your water and sewer bills can vary.
You might also find additional water and sewage-related costs on your monthly list of bills. For example, buying a beach house on the East Coast often includes stormwater drainage utility fees that you won’t find in more arid regions, like California. Due to all these costs, it’s important to do your research on all a potential home’s water and sewage fees before you purchase the home.
3. Gas or propane
If your home uses natural gas for heating or has a propane-fueled fireplace, you will need to pay an additional fee to a gas utility company. The more features of your home that run on natural gas, the more frequently you will need to pay the gas bill:
- If your home runs largely on natural gas energy, you will pay this monthly bill year-round.
- If your heating system or fireplace alone runs on gas, you will only need to pay this cost when you use gas in colder months.
Since Americans pay $712 a year on average for their annual residential gas bill, it’s important you take steps to lower it. Some popular methods include lowering your thermostat in the winter to reduce consumption, replacing inefficient gas or propane-powered appliances, and having a heating and cool professional perform an energy audit of your home.
4. Homeowners association (HOA) bills
Homes in certain areas or communities are often a part of a homeowners association (HOA). Each home in the community pays a monthly, quarterly, or annual HOA bill. This money is often used to cover collective/common area costs and fees that the community uses, such as the costs to manage the common garage or lobby of a condo building.
The more amenities or services covered under your HOA, the larger this bill is likely to be. For example, if your HOA covers a community pool, tennis courts, lawn care, and private road maintenance, your monthly bill is likely to be upward of a hundred dollars. Conversely, if your HOA merely pays to keep the street lights on, you will probably find this bill to be less. Before you purchase a home, check what the HOA bills are to see if you can afford them.
5. The big one: mortgage payments
When you become a homeowner, you will drop your rent and pick up a monthly mortgage payment instead. While it may seem pretty straightforward, mortgage payments are composed of several smaller bills:
- Principle: The principle is the payment towards your home loan.
- Interest: Each month, your bank or credit union will deduct interest from your mortgage payment.
- Insurance: Home insurance is often swept into your monthly mortgage bill. If you have additional insurance coverage (like flood insurance), you may need to pay this bill separately each year.
- PMI: If your down payment is less than 20% of the appraised value of your home, banks and credit unions may consider your loan a risky investment. To protect their finances, banks and credit unions can charge you for private mortgage insurance (PMI). This insurance will refund the bank if you default on your loan.
- Escrow: Banks and credit unions often pay for your property taxes and other fees alongside your mortgage. Each month, your bank puts some of your mortgage payment aside in Escrow to cover these costs.
Due to all these costs, it’s important to work with a bank that can help you understand all these parts of your mortgage before you take out a loan and buy the home.
6. Property taxes
Besides your mortgage, property taxes are another constant bill that needs to be paid either monthly or annually, with the average American paying around $2,471 in property taxes each year. Your property taxes will likely change annually, as your city/county/district will assess the value of your house every year and send you an invoice for your annual property taxes.
You can expect your property taxes to be higher if your home has increased in value or if you’ve made improvements to your home, such as adding a new kitchen or addition. Since increased value means higher property taxes, it’s a good idea to keep an eye on your home’s value to know if you should start budgeting for higher property taxes in the following year.
7. Unexpected expenses
Leaking roof. Clogged toilet. Malfunctioning washing machine. When owning a home, you also need to be prepared for small to high unexpected costs. The rule of thumb is to plan on budgeting to spend at least 1% of your home’s value on upkeep costs.
8. Additional fees
Variable maintenance expenses are unavoidable when owning a home. These are the costs you’ll pay to care for and maintain your property. A skilled DIY-er might be able to bypass some of the service fees that come with homeownership. However, most homeowners will have to pay regular service bills, such as gutter cleaning, pool cleaning, HVAC system service and maintenance (e.g., filter replacement), and plumbing and electrical work. Other additional fees you’ll want to look for include:
- Pest Control: If your area is prone to certain pests, you may find yourself paying routine pest control bills.
- Termite Bonds: Similarly, many homes are often under a termite bond. This service routinely checks for termites and treats any infestations that might come about. If it is not covered under your HOA, you may be paying for a termite bond on your own.
- Lawn Care: Speaking of homeowners associations, your HOA or municipal regulations often have certain lawn care requirements. If you are not skilled with a lawnmower or hedger, these lawn care requirements will often result in regular landscaping bills in the spring and summer months.
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