Transitioning from a renter to a homeowner unlocks a whole new level of freedom and responsibility. Now, you can paint your living room walls that Kermit-green colour that you love so much, or adopt 15 cats \u2014 sans a landlord, there\u2019s just so much more flexibility.<\/p>\n
Of course, questionable paint choices and pets aren\u2019t the only things that will change in your life as a new homeowner. Housing costs, once limited to just a rental payment and some utility bills, balloon into much bigger and possibly very consequential expenses. That\u2019s why, when marching into the realm of homeownership, one must be equipped with the financial skills and budgeting know-how to take on the momentous responsibility of owning real estate.<\/p>\n
\u201cIt\u2019s important to go into homeownership fully informed of all the costs involved with buying your home, as well as maintaining those expenses in your monthly and annual budgets,\u201d says Octavia Ramirez, founder of Paper & Coin, a Millennial-oriented financial coaching service.<\/p>\n
If you\u2019re upgrading from rental status, upgrade your financial smarts too. Whether you\u2019re just exploring the possibility of buying a home, or you already own one and need a little helping hand, Ramirez offers a few pointers on how to manage your money and get your house in order.<\/p>\n
And the total comes to ….. more than you thought<\/strong><\/p>\n One of the biggest expenses of homeownership is the mortgage principal, no doubt. Tack on interest and mortgage insurance \u2014 if you have it \u2014 and you\u2019re looking at a pretty sizable chunk of change. However, what some new buyers fail to see is the additional expenses of ownership beyond the mortgage payments.<\/p>\n \u201cYou have to take a lot more expenses into account as a homeowner than a renter,\u201d explains Ramirez.<\/p>\n Even before you set foot in the door, homeowners will be tasked with paying for utility hookups, realtor and lawyer fees, moving costs, and potentially a home inspection. Then, there\u2019s the upkeep \u2014 you might own an army of Scottish Folds now, but your landlord isn\u2019t around to pay for those property taxes anymore. Home insurance, utilities, taxes, condo fees, and maintenance expenses are the owner\u2019s responsibility.<\/p>\n Ramirez stresses that it\u2019s important to be aware of these costs, and account for these expenses in your monthly and annual budgets. Some fees are charged quarterly, or once a year, like your property taxes. Knowing roughly how much they cost upfront will allow you anticipate when to pay and how much you should tuck away until that time when the payment is due.<\/p>\n \u201cSame thing with certain utilities, like water bills, which only come once per quarter and might have been covered with your rent before,\u201d explains Ramirez. \u201cMake sure you know when to expect that, and approximately how much that will be, so that you\u2019re prepared when the bill comes.\u201d<\/p>\n Ramirez says that it will take some time living in your new space to know approximately how much everything will cost, though you should still have a cushion of savings available for added or unexpected expenses. Keep in mind that the size, location and type of property you buy will cause your expenses to vary \u2014 larger homes cost more to heat and cool, big-city living could mean higher property taxes, and living near a hurricane-prone zone might spell greater insurance fees.<\/p>\n A rainy-day fund for a six-month-long flood<\/strong><\/p>\n In your rental apartment, if your hot water tank croaked it, your landlord would be responsible for repairing it at no cost, allowing you to get back to taking 40-minute long showers unscathed by technician fees.<\/p>\n Those days of free repairs are gone in homeownership. When those unexpected repairs hit, they hit your wallet hard, which is why building a reserve of savings is vital for tackling emergency costs. Whether you\u2019re renting or owning, Ramirez recommends having three to six months worth of expenses banked in a savings account for emergencies. When you own a home, it\u2019s best to add more to this fund.<\/p>\n \u201cAs a homeowner, your expenses will likely be higher than someone renting, which means that you\u2019ll have to bump this fund up to reflect your new budget and monthly expenses,\u201d she explains.<\/p>\n Unexpected costs aren\u2019t limited to faulty water tanks and leaky roofs either \u2014 losing a job, falling ill, or taking an unpaid leave from work constitute costs you may need to cover. When you have dependants like children or pets, covering their expenses is critical, so Ramirez recommends that large families contribute more to their emergency fund and have a stockpile of at least eight months worth of expenses to cover any financial crises.<\/p>\n Turn additional space into additional income<\/strong><\/p>\n Homeownerhsip is expensive, duh. But your home doesn\u2019t have to sit there like a big pile of bricks and mortar \u2014 if you\u2019re struggling to make your homeowner budget work, even if you\u2019ve only been doing it for a year or two, you can get creative with the assets that you have to create additional income.<\/p>\n \u201cDo you have two cars sitting in the driveway? Make do with one, and list the other one on a car sharing or renting website like Turo,\u201d says Ramirez. \u201cHave an extra room in the house, or a legal basement apartment? Consider renting it out to someone, or listing your place on Airbnb, if possible. Or, sell the extra furniture and things in your home to bring in some extra cash. Find ways to turn your assets into income generators, especially during a time that money is tight.\u201d<\/p>\n Even picking up extra hours at work or freelancing could make a huge difference to your budget. As Ramirez explains, it\u2019s worth trying to avoid losing your home or having to move again. In the worst case scenario, sometimes it\u2019s better to break up and move on rather than stay together \u2014 you might have to cut your losses and sell.<\/p>\n \u201cNot ideal, but better to start fresh without the day-to-day struggle of hanging on to something that may have been financially over your head in the first place,\u201d says Ramirez.<\/p>\n