Mortgage Calculators online are exciting to use, but they forget some key information that will strongly affect your monthly payments and overall monthly expenses you may not have had, especially if you’ve been renting.
• Property Taxes (with & without Exemptions), Homeowners’ Insurance •
On the calculators you will see the ‘monthly PITI’ (Principal, Interest, Taxes Insurance) but those numbers rarely tell the exact story of what those numbers truly will look like for you.
Of course there’s the mortgage interest rate which you won’t know what that really will be until you, 1. Pre-qualify with a lender, and 2. Actually contract on a house. The rate when you started looking may differ from the rate that you may lock into under contract. Know what those amounts might feel like by getting some pre-estimates from the lender. And there’s always the option to refinance that mortgage if the rates do drop significantly (more than 1%) to help with costs. There are costs to refinance, but often, if you stay with your current lien-holder, there may be options to refinance for a low or zero amount.
Homeownership does seem costly, but it all comes back at the sale. Rental fees never do.
Homeowners’ insurance (as has Renters’) has gone up in cost quite a bit in the last 2 years. Make sure your agent is aware about properties you’re interested being in or near a Flood Zone, and realize the larger & more expensive the house, the more costly your homeowner’s insurance will be.
When you have identified a property or two you really think is what you want, call your insurance specialist and see if they will run some numbers for you on that house, to add to your costs lists you should be making. This will assure that you won’t be surprised later.
Best to have your lender run all those numbers on specific properties once we get to that point.
But that’s not the full ‘cost of ownership’. Monthly recurring expenses such as these may now be required:
- Electric
- Water/Sewer
- Trash
- Internet
- Security system
- Maintenance (pool, mowing, repairs)
- Commuting
These are the numbers that scare a lot of folks into staying renting. Understandable, however that money you pay to someone else’s mortgage is GONE each month. That PITI part, which is the bulk of the monthly outflow. Homeownership gives you tax writeoffs, property value appreciation, and freedom to do what you wish with your own living space. When you sell that same property later (at least 2 years later), you get a lot of the money paid out back. Renting will never give it back to you.
Don’t let expenses scare you. Make that list, get the numbers straight in your mind, and weigh the pros and cons. I think I know which way you’ll lean. Happy Homeownership!
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