Ask anyone and they’ll tell you – real estate is a big investment. It necessitates a sizable commitment from buyers in the form of a down payment, not to mention a number of other ongoing expenses. In this article, we’ll discuss the commonly overlooked costs of home ownership and remind you why they’re essential to consider when figuring out how much of a mortgage you can really afford.
Mortgage Payments
While this is definitely going to be the most obvious expense on the list, it’s worth starting out with as it’s likely to be the largest. Mortgage payments represent the monthly installments you pay towards your home loan, combining the interest and principal payment rates outlined in its terms.
One thing that some people forget when first buying a property is that these payments can change over time, depending on your specific interest rate and its term. For example, you may lock in a five year fixed rate today, but that same rate won’t be guaranteed when it comes time to renew.
Property Taxes
There are few things you can be sure of in life, but if you’re a homeowner, property taxes are one of them. Collected by municipal governments on a yearly or monthly basis, these payments go towards funding things like public education, fire stations, and policing.
They’re generally based on the overall value of your home, and in Ottawa’s case, they sit at a rate of 1.06841% a year.
Utilities
Utilities are another common cost to be aware of when investing in a home. Payments for essentials like heat, water, and electricity are each billed monthly, and it’s important to anticipate monthly payments for each. While prices can fluctuate, it’s generally best practice to set aside at least a couple hundred dollars for this expense. Take a look at your current heat, water and electricity usage, and don’t be afraid to ask the current homeowners or others in the area what their rates are as well, as current rates can help in gauging your case-specific costs.
General Maintenance
Homes require ongoing maintenance in order to preserve both their long term value and livability. While they may seem like extra or unrelated costs, having the money set aside for things like repairs, yard care, and replacements is crucial to sustaining your home over time.
It’s generally recommended that homeowners set aside 1-3% of their home’s total value every year for maintenance and repairs. So, if you own a home worth $500,000, you should be prepared to spend $5,000 – $15,000 annually on keeping it up.
Condo Fees (if applicable)
Not all home purchases come in the form of a detached house – some are units in condominium and apartment buildings. While opting to go this route can save you money in some ways (like in land costs and general maintenance), you’ll be subject to condo fees.
These monthly or yearly payments are made to the condo corporation and help to cover the building’s common expenses, such as snow removal, landscaping, and garbage removal.
Home ownership is a major financial commitment, and it’s important to be prepared for all of the costs involved – not just the mortgage payment. Property taxes, utilities, maintenance, and condo fees are all additional expenses to consider when budgeting for your dream home. With a little advance planning, you can be sure that you’re ready for everything that owning a home entails.