The cost of homeownership in the US is often the main concern of first time home buyers. Is it better to own a property or to rent? Is it better to postpone the purchase of a home or the sooner you buy the better? There are so many questions to answer, but here we will focus on another one: how much does it cost per month to own a house?
First of all, there is the cost of closing. When you buy a property, expect to pay up to 5% of its price in closing costs. A buyer’s agent is usually paid by the seller or the listing agent.
Secondly, a homeowner owes property taxes. All states levy property taxes, but the lowest ones are in Hawaii (0.29%), Alabama (0.40%), and Louisiana (0.51%). Rates vary between states, but there are exemptions depending on your age or disability.
Home insurance is the third cost for aspiring homeowners. It costs about $35 to protect every $100,000 worth of property, but you may have to pay higher premiums if you live in an area prone to wildfires or other acts of God.
HOA fees or maintenance fees can be considerably high for some properties. Again, this cost varies greatly from one neighborhood to another - between $100 and $700, with an average of $300 per month.
Repairments are another cost that renters don’t have to worry about. When something breaks, the homeowner (the landlord) is responsible for hiring a contractor and paying the bill. Of course, it is not the same for co-ops, but that is a completely different type of homeownership. Things are meant to break and fail - that is the idea behind our market economy. They have to be replaced in order to generate new demand. So, over the years, the cost of all repairments and home improvements add up.
Since most residential properties are purchased with a different type of loan, homeowners are expected to pay interest. Although there are home loans that don’t require a down payment, you cannot avoid paying interest. So, owning a house is like a rent-to-own agreement - you are paying the bank a monthly rent for a certain period of time and at the end, you will fully own the property, without the risk of foreclosure floating above your property.
Homeownership is rewarding if you start right from the beginning. Choose a property you can afford, that is within your budget and doesn’t cost more than 30% of your net monthly income. Also, use your good credit to get the largest loan amount possible to purchase an investment property - preferably a duplex or a multi-family house that can generate income for you, thus reducing the cost of homeownership. If you’re not sure what type of property qualifies for this strategy, perform a SWOT analysis - it’s easier than it sounds and will give you peace of mind.