Ensuring homeownership remains an affordable option stretches well beyond monthly mortgage payments. There are numerous recurring expenses known as ‘carrying costs’ that help you maintain your investment and, therefore, must be factored into your budget to avoid overextending yourself financially.
Here are five main carrying costs to consider when researching properties:
- Property taxes. Property taxes are used to pay for municipal services such as snow removal, garbage and recycling collection, recreational facilities, road maintenance and so on. They’re based on a number of factors including property value, its relative value compared to other properties in the area, as well as the size, age, location and construction type of the home. Ask the listing Realtor for property tax details.
- Home insurance. Home insurance protects your house and its contents against damage, vandalism and theft, as well as if someone is injured on your property. Many lenders will require proof that you’ve obtained home insurance before issuing your mortgage. Monthly insurance premiums are determined by the coverage you need and inherent risk factors. Some considerations include where you live (are you close to water where flooding could be an issue?), the area in which you live (is it considered high risk for break ins?), the construction and age of the home (do you have old wiring that could cause a fire?) and the value of the house and its contents (what will it cost to replace stolen or damaged items?).
- Utilities. Utilities is the collective term used when referring to the services required to keep your house liveable. This includes power (hydro), water and heating. The amount you pay for each utility depends on a number of factors including the size of your house, the number of people living with you, whether you have electric or natural gas, whether you have energy-efficient windows and doors, whether you undertake regular maintenance on your furnace, fireplace and appliances, the amount of usage and the time of year.
- Cable, phone & internet. If you’re using the same provider for all services, you can save money by requesting a bundled rate. It’s best to compare rates and packages from multiple providers to ensure you’re getting the best deal. Be sure to contact local, independent companies as well as the larger, more common household names.
- Maintenance. A home consists of many working parts and systems. Things can break, deteriorate over time or require ongoing attention. Landscaping and yard work, snow removal, home cleaning, roof maintenance, eaves clearing, and furnace and A/C care are all common examples of household maintenance. Regular upkeep will help reduce some of your maintenance costs, but there are also situations such as a leaky roof or a burst pipe that are beyond your control. It’s important to keep a considerable cash reserve to cover both routine and unexpected costs so you’re not left scrambling to pay for them.
Have questions about how much you can comfortably afford to spend on a home, including carrying costs? Answers are a call or email away!