Friday, July 26, 2013

Can You Afford that House?

When my wife and I bought our first house, I was pretty sure I could handle the mortgage and the associated costs—which we generally call PITI (Principle, Interest, Taxes and Insurance) but I was blind-sided by the extras that I had not considered.

A home is a constantly evolving asset. There will always be costs associated with ownership, and normally when you least expect them. Just like everything else in life, surprise car and home repairs, unexpected medical expenses come when you absolutely don't expect them.
The day we moved into our first home, we suddenly needed curtains. And we needed extension cords, and bedroom shades and once we had been there for a few months, we needed storm windows, and a new hot water heater. Of course we needed a deck, and a new roof on the garage. Really, it never ends. So now when I talk to first time home buyers, I try to share that their offering price is not the last time you will decide how much you want to spend.
There are a ton of smaller costs that make up home ownership. Call them hidden costs, call them extras. They are there in every part of your life. A new dress may demand new shoes. A new car may require more expensive insurance and could include a whole list of accessories the dealer will offer. Buy a boat? Prepare to buy a trailer hitch for the car and a trailer for the boat. Our economic system is based on extras.

If you want a beautifully manicured lawn and trimmed hedges. Think about the maintenance and cost that look requires. Never had a yard before? Get ready to hire a yard service or buy a mower, edger, hedge trimmers, gardening tools, plant food, weed killer. No matter what, you’ll be spending more at your local garden center than you thought.

And don't underestimate the costs of furniture. Decorating a new home is expensive, even if you do it at Goodwill or a consignment store. And even if you already have enough furniture to technically fill your space, at some point you will probably decide it just doesn't look quite right. If you’re not in a hurry to buy furniture, remember to check Ebay and Craigslist to find great deals that will match your style. And remember, even when you are saving money, it's because you are spending money on the new digs.

The basic cost of living can vary widely from location to location. There are magazines that create grids which indicate the additional cost of moving from suburbs to cities. Often these costs are ongoing, like food. So be sure to check out prices at grocery stores, local restaurants, gas stations, and dry cleaners. Even your daily commuter costs can add up to a big chunk of change. States like New Hampshire have no sales tax and no income tax—that's a bonus. But a hidden cost is the very high property taxes in the “Live Free or Die” state.

Moving to the new home may be fun for the family, but there are the moving costs to consider. It’s not just the cost of the moving truck or movers themselves. Consider things like moving insurance, the price of gas, and charges for things that you choose to do yourself. Cardboard boxes, paper, tape and blankets can add up.

Your first week or so may include lots of restaurant food. Once you've found the pots and pans there’s still the price of buying that first round of groceries to fill your completely empty fridge and pantry, plus paper products and more. And then you have to buy things like curtains and cleaning supplies, shower curtains, and other home necessities. The expenses in the first couple weeks of your new place add up fast.

New homes never have bugs, right? But then again, you may be surprised to see ants and other tiny creatures seeking comfort in your home. You may find yourself spraying the corners occasionally, and maybe even paying for a pest control service. Paying for regular inspections may feel like unnecessary money to spend, but if you’re in a termite-prone location, it may save you big bucks over time.

Turn off the lights all you want, but until you’ve lived in a house for all four seasons, you won’t know how much energy you’ll use. You may find your refrigerator is sucking up your electricity budget or you're suddenly paying hundreds of extra dollars a month for air conditioning or to operate a balky pool motor. Then add in the unbelievable costs of telephone, internet and cable, plus municipal charges for water, garbage, sewer, and the rest.
Only after you’ve been in the house for a year, will you have a solid idea of what that house costs, and only then can you make educated decisions on investing in things like more energy efficient appliances, HVAC, solar panels, thermostats and windows. Do the math to see what those upgrades will save over time, because although they may cost a lot upfront, when amortized over a few years, they may be worth it. And there are still some Federal savings for upgrading air conditioning or adding solar.
Dane Hahn is a real estate professional. You can reach him at 941-681-0312, or by email at See him on the web at

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