How To Determine Your Potential Homeownership Expenses

Copyright © Chantal McBride
http://www.WebTD.com

If you’re in the market to buy your first home, you probably don’t have a clear sense about the costs of homeownership. Even people who presently own a home and are considering trading up often don’t have a handle on their current or likely future homeownership expenses. This article will help you understand your likely homeownership costs.

Mortgage Payments

A mortgage is a loan you take out to finance the purchase of your home. Mortgage loans are generally paid in monthly installments over a 15-, 30 or even up to a 50 year time span.

In the early years of repaying your mortgage, nearly all of your mortgage payment goes toward paying interest on the money you borrowed. The later years of your mortgage are when you begin to rapidly pay down your loan balance ( the principal).

Property Taxes

Property taxes are typically based on the value of the property. Because property taxes vary from one locality to another, call the relevant local tax collector’s office in the area you wish to purchase property. They will be able to tell you the exact rate in your area. (You should be able to find the phone number in the government section of your local phone directory.) In addition to inquiring about the property tax rate, also ask what additional fees and assessments apply.

Tax Write Offs

Thank goodness for the tax benefits of homeownership. The federal tax authorities at the Internal Revenue Service (IRS) and most state governments allow you to deduct mortgage interest, and property taxes when you file your annual income tax return. You may deduct the interest on the first $1,000,000 of mortgage debt as well as all the property taxes. The IRS also allows you to deduct the interest costs on second mortgages known as home equity loans (HELOCS) to a maximum of $100,000 borrowed.

Insurance

When you own a home with a mortgage, your lender will insist as a condition of funding your loan that you have adequate homeowners insurance. The cost of your insurance policy is largely derived from the estimated cost of rebuilding your home. Buy the most comprehensive homeowners insurance coverage you can and take the highest deductible that you can afford to help minimize the costs.

Budgeting For Closing Costs

As you budget for a given home purchase, don’t forget to account for the inevitable one-time closing cost fees. Typically, closing costs amount to 2 to 5 percent of the purchase price of the property. Thus, you shall not ignore to budget the closing costs as well as the amount needed for a down payment when calculating how much money is needed to close the deal.

Maintenance Costs

In addition to your mortgage payment, your house will need painting, roof repairs, and other types of maintenance over time. For budgeting purposes, you should allocate about 1 percent of the purchase price of your home each year for maintenance expenses.

With some types of housing, such as condos and town homes, you pay monthly dues into a homeowner’s association, which takes care of a good chunk of your maintenance fees. In that case, you’re only responsible for maintaining the interior of your unit.



About the Author:
-----------------------------------------------------------------
To find the best home loan with the best rate so you can save a ton of money each month visit:
http://www.WebTD.com
-----------------------------------------------------------------