The True Cost of Owning a Property

Home ownership is often considered by the layman being a single expense i.e. the purchase price of the property. However, home ownership consists of several expenses. It is easy to forget about some of the expenses while budgeting. Therefore, here is a checklist of some of the expenses:

Purchase Price
This is the most obvious cost that is associated with real estate investing. The transaction costs include brokerage paid, processing fees paid to the bank to process the mortgage loan as well the legal charges that are collected by the government to register the property in the name of the new buyer. First time buyers have a tendency to underestimate these expenses.

Interest Paid
Most properties that are purchased today are purchased using borrowed money. Mortgage is the new form. People buying properties with cash down are virtually unheard of today. However, whenever there is a mortgage, there are mortgage payments and mortgage payments also include an interest component.

Insurance
Most mortgage lenders require the buyer to have insurance on the property. This is because in the event of natural disasters like earthquakes and hurricanes, the property could be destroyed. As such, the borrower will simply stop making payments towards the property. Therefore, in order to protect their interests, the lender insists on insurance.
Even apart from the insurance which covers the value of the house, many homeowners opt for insurance for home contents as well. This is because they spend a significant amount of money doing interiors as well as need to make sure that their investment is protected in the event of an unforeseen scenario. This too adds to the cost of property ownership.

Property Taxes
When we buy real estate, we agree to make a stream of payments to the government every year until perpetuity. These payments are called property taxes and almost every government in the world levies these taxes. Once again, these taxes contribute significantly to the cost of home ownership. Also, one needs to understand that these taxes contribute significantly to the cost of home ownership.

Maintenance
Properties across the world now come with amenities. Gated communities with swimming pools and jogging tracks are common. The idea is to provide the people with a lifestyle and not merely with a home. However, these amenities require a lot of maintenance. Gated communities require scores of employees and equipment to guard the place and keep it clean. As such, these charges are also billed to the homebuyers as a monthly expense.

Utilities and Furniture
There are small costs involved with getting the utilities transferred to one’s name as well as furnishing the house. These costs too add to the total cost of home ownership.
Home ownership is therefore a complex maze of multiple costs. One needs to be very careful in understanding and budgeting for these hidden expenses as omission of these expenses can significantly dent your budget in the future.