You’re finally in your new construction home, and wow it feels great until you get your first bill. Or more accurately, several bills. Hopefully, in real life, the extra bills don’t catch you off guard because you’ve prepared by reading this blog and talking to an experienced agent or mortgage lender. Owning a home comes with much more than just having to pay your mortgage off. Here’s what you can be expected to pay when you own a new construction home.
Property taxes and homeowners’ association (HOA) fees
Regardless of where you live or whether you buy a new home or an existing home, you’ll always be expected to pay property taxes. The amount is determined by the local township, city, or county your home is in. Much like how we pay taxes on items we buy, you’ll have to pay a percentage of your home’s assessed market value in taxes. The amount can total up to a couple of hundred dollars per month or easily over a thousand dollars. It depends. What’s more, if you make any alterations to your property (i.e. build a pool, patio, shed, install new kitchen counters) or really turn up that curb appeal when the property assessor comes by, your property tax can increase because it all depends on your home’s market value.
In addition to property taxes, most neighborhoods these days have an HOA fee, which will cover maintenance on common areas (i.e. the entrance to the neighborhood, snow removal services for roads, etc.). Fees can range widely and so can the services that are included from neighborhood to neighborhood. You might also find that the HOA fees in a newly built community are high initially but as more people move in, the fee can lower as fees are divided among more residents. Additional fees may also be included from time to time. For example, if roads in your neighborhood become damaged and need a major repair or if a storm knocked down a tree in the neighborhood entrance, you may find those costs have been divided up and added to your following HOA bill.
This one shouldn’t surprise you as much, since your mortgage lender or bank may already require this from you before they can give you your estimate. Your mortgage lender may also group your insurance, taxes, mortgage together in a bundle called PITI – principal, interest, taxes, and insurance.
Your homeowner’s insurance should be a fixed cost, but it can also be subjected to changes. You should read over your insurance and understand what you’re covered for. Generally, a basic homeowner’s insurance does not protect you from mother nature. For example, if you live in a high-risk flooding area, your insurance will not cover your house when it floods and you will need additional flood insurance to cover that risk. The same sort of thing goes for other disasters like tornadoes, hurricanes, and earthquakes. You will need to purchase additional coverage or upgrade your homeowner’s insurance to cover what you need.
Landscaping and lawn care
Everything is new about your new construction home, including your lawn. In most cases, new builds will come with freshly sodded or seeded lawns that need to be watered frequently or they can be completely bare. Your home’s exterior will be ready for you to design however you wish. As much fun as that sounds, unfortunately, building out your lawn with plants and landscaping designs can get pricey quickly. And after your lawn is fully decorated, you’ll need to spend some money maintaining it every year. It’s difficult to nail down exactly how much you will be paying for your landscaping. According to Homeguide.com, the average homeowner spends $3,000 to $15,950 for new landscaping installation for their home. We recommend ballparking what you want to be done for your landscaping and budgeting some wiggle room. You never want to go in without a plan of what you want or an idea of how much it is going to cost you.
Basic utilities – electricity, gas, water
No surprises here either. You have to pay these fees whether you live in the house you own or lease a home. Although these basic utilities shouldn’t cost you very much compared to some of the other items on our list, don’t forget to budget them into your finances as you will be expected to pay these bills routinely for your home.
General house maintenance – roof, plumbing, appliances
The beauty of owning a new build is that you’ll basically be maintenance-free the first couple of months, maybe even the first year. Yes, there should be things you’re doing every month to make sure your home is in tip-top condition, but the efforts and costs of those things should be nowhere near as expensive as maintenance in an existing home. The best thing is that most of your appliances and windows along with other aspects of your home will be covered under warranty. You should discuss these with your builder and find out what is covered and keep a record of how long your warranties will last. Before moving into your new home, you’ll conduct a final inspection with the builder. This is your chance to check everything out and make sure that your new appliances are working properly and there are no other problems with your home.
Some initial maintenance tasks you may be expected to perform in your first couple of months in your new home are changing the furnace filters and cleaning your gutters. There may be construction particles such as dust or dirt, so you’ll want to check how your filters are at the end of the first month. Typically, you want to change these filters every 90 days. Dust accumulates naturally over time, and there’s no escaping that. And unfortunately, you’re bound to have leaves or debris in your gutters, even a new build can’t avoid that. You’ll either have to hire someone to clean out your gutters (especially in the fall season) or if you’re handy enough, you can clean them yourself.
The bottom line
Owning a home can be a valuable investment and a way to build your equity, however, if you’re a first-time homebuyer these extra costs can take you by surprise. You’ll likely hear so much about mortgage payments, mortgage payments, and mortgage payments that you may forget some of the other things that come after you move into your new home. The real costs of owning a home are your mortgage payment plus all the costs on our list and maybe some more (i.e. buying furnishings, cleaning fees, making home improvements, etc.). The best way to prepare for all the costs of owning a home is to speak to an expert, whether that’s us or to your trusted financial advisor or mortgage lender.
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