How to Anticipate Home Maintenance Costs
Many home buyers focus much of their attention on a home’s purchase price or the interest rate of the loan. In reality, saving $10,000 on the overall purchase price or getting a 1/8-point lower on the loan won’t translate into cash in your pocket. But hidden expenses—those that come with the territory of homeownership—will certainly affect your finances. Here’s how to plan for home maintenance costs.
Maintenance costs can vary widely, depending upon where you live
If you’re moving from one part of the country to another, the costs associated with running and maintaining a home can go up or down dramatically. For instance, if you live in San Francisco, air conditioning isn’t necessary, and your heat often comes from gas-fired HVAC systems. So your monthly utility bills and the regular costs associated with homeownership can be relatively low. But to heat a home in the Northeastern U.S. through the winter, you’ll need an oil truck to deliver 150 gallons of oil to your home every five weeks, to the tune of $800 per fill up. And don’t be surprised by an extra $100 per month on your electric bill from May to October if you’re running the air conditioner. The average consumer, without knowledge of these day-to-day realities, will face severe sticker shock.
If you move from the suburbs to the country, expect a septic system and well water—each of which requires regular maintenance and expenses.
Ask for credits instead of a lower purchase price
To manage these maintenance costs, set some money aside. One way to accomplish this is to get a credit when you buy the home. Most lenders will give buyers a credit back from the seller at the closing—up to 6 percent. The credit cuts your closing costs and keeps money in your pocket for home improvement.
Establish a home maintenance plan
As a part of your home buying due diligence, ask the property inspector what’s required to maintain the home. Use the walkthrough with a licensed inspector and the written report to identify home improvement issues you’ll face. Budget and plan for a two-, three- or five-year plan to address issues like a leaky water heater, energy-inefficient single pane windows or a boiler near the end of its usable life.
Know before you go
If you’re moving to a new area, find out at the beginning of the home-buying journey what to expect once you’re a homeowner. Do your due diligence on home improvement and maintenance just as you would school districts or housing stock.