Hidden Costs of Homeownership and How to Prepare

Property Taxes: Know Your County’s Rules

Property taxes are not exactly a hidden cost, but how they change after you buy the home can be surprising. During the pre-approval process, you need to understand how your county handles tax assessments. Here are some things to keep in mind:

• When will the county reassess? Some counties reassess property taxes every year, others every few years, and some reassess only when you buy the home. If the property was last assessed years ago, your taxes could go up significantly after your purchase.
• Are there exemptions? These can save you money if you're eligible. For example, veterans with a 100% disability rating may be exempt in some states, but they need to file. If you're in a specific income bracket or age group, or own the home as your primary residence, you could also be eligible for exemptions.

You won’t get this information automatically from your lender or real estate agent, so make sure to look it up yourself. Just Google “[Your County] property tax assessment” and “[Your County] tax exemptions” to get started.

Also, find out how much your property taxes can increase each year. Some states limit increases, while others don't. Understanding this now will help avoid surprises later.

Homeowners Insurance: Don’t Skip the Research

You should start shopping for homeowners insurance before you go into a contract. Here's why:

• It's not as quick as you think. Getting a quote can take longer than expected, sometimes up to 45 minutes.
• Quotes vary significantly. It's shocking, but a $400,000 home can get insurance quotes that differ by $1,000 depending on the insurer.

When shopping for insurance, pay attention to deductibles. A lower deductible might seem like the smart option, but if the deductible is too small, you may end up making claims for smaller issues that could increase your premium down the road.

Some insurance companies lure people in with low initial quotes and quickly raise the premium afterward. Be sure to read reviews and avoid companies known for raising premiums dramatically after closing. If you see reviews mentioning sudden premium increases, think twice before choosing that insurer.

When it comes to homeowners insurance, cheap isn't always the best. Look for companies with solid reputations for standing by their customers, especially in emergencies. For instance, Chubb, a well-known insurance company, is often praised for its customer service and disaster readiness, like having fire trucks ready during wildfire season in California.

Budget for Insurance Increases

Even with the best homeowners insurance, expect your premium to rise over time. This is especially true in areas prone to natural disasters, where insurance costs are trending upward. Plan for gradual increases and make sure your budget can handle them.

Home Maintenance: It Adds Up

Home maintenance is often overlooked, but it can become a huge expense if you're not prepared. You've likely heard horror stories about new homeowners having to spend thousands of dollars they weren't expecting in the first year. That’s why getting a thorough home inspection is critical.

• Choose your own inspector. Don’t just go with the inspector your agent recommends—unless you've vetted them yourself. While many agents recommend good inspectors, there are some who choose ones that won’t point out major issues.

Go to the inspection yourself and walk through the property with the inspector. This will give you a clearer idea of what repairs or replacements could happen in the near future. Key things to watch out for:

• Air conditioners
• Roof condition
• Foundation issues
• Plumbing and electrical systems

Even if the inspector says something has five years left (e.g., the air conditioner), you should start budgeting for replacements now. Things get messy when you're caught by surprise.

One easy way to manage ongoing home costs is by setting up a maintenance fund. Each month, set aside a small amount—maybe $100 to $150. This way, if something breaks unexpectedly, you’ve already got money saved to handle it.

Factor in Yard and Pool Maintenance

If your new home has a big yard, a pool, or even a fence, the costs to maintain these aren't included in your mortgage. Lawn care, pool cleaning, and even installing a fence quickly add up. Here are some questions you should ask yourself:

• Are you going to take care of the yard yourself or hire a landscaper? How much will that cost?
• If you have a pool, are you ready to handle the chemicals and cleaning, or will you hire a service?
• Do you plan to install a fence? If so, start planning now for the expense—fences can cost thousands, and prices often surprise people.

By planning for these costs before they hit, you can avoid falling into credit card debt down the road.

Save Yourself Stress: Have a Plan

Homeownership comes with responsibilities, and you need to be financially prepared. The best way to avoid unpleasant surprises is to know what’s coming and plan for it. Get a thorough home inspection, shop for insurance carefully, and start budgeting for future maintenance.

Owning a home should be joyful, not stressful. By preparing now, you can avoid the “hidden costs” that catch many homeowners off guard, and instead, enjoy the long-term benefits of having your own space.

Questions or Comments? Feel free to reach out—I'm always here to help you better understand homeownership and mortgage planning.

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